Jiangxi Separation of Changhe Jiangling or BAIC M&A M&A


Recently, reporters learned from many parties that Changhe Motors, which plans autonomy for a long time, is likely to usher in its “Independence Day”. At present, Changan in China has reached an agreement with the Jiangxi Provincial Government to reorganize Jingdezhen Base and Jiujiang Base in Changhe Automobile. Or other ways to strip off the Chang'an system, and the Hefei base affiliated with Changhe Automobile was placed under Chang'an.

Changhe Auto will introduce strategic partners after independence, and will convert Changhe assets into equity through mergers and acquisitions. At present, BAIC Group has expressed strong willingness to merge with Changhe.

In June of this year, Xu Heyi, chairman of Beijing Automotive Industry Group, publicly stated: “In the second half of this year, BAIC has at least one major move in mergers and acquisitions. If all goes well, it may be possible to merge and restructure the two auto companies before the end of the year.”

According to the internal conditions defined by Beijing Automotive Group, Beiqi’s acquisition target must first play an important supporting role in the strategic layout of the company’s scale expansion; secondly, it must have auto production qualifications; and third, it can provide breakthrough technical assistance; Fourth, it is best to state-owned enterprises. This four-condition Changhe car happens to fit.

At present, BAIC and Changan have reached consensus on the acquisition of Changhe Automobile in principle, and have communicated with the Jiangxi Provincial Government, but still need to obtain approval from the relevant national authorities. Before the press release, BAIC, Changhe and Changan refused to comment on the matter.

The latest news shows that BAIC is making final efforts for Changhe M&A. The biggest resistance comes from Jiangling Motors. However, if the Changhe River does not become a merger, BAIC has another card to acquire the Jiangsu Zhenjiang Automobile Manufacturing Plant. This acquisition has been negotiated.

Jiangling is powerless?

The acquisition of Changhe Automobile by BAIC is still the final game because the fate of Changhe Automobile still has another possibility: Under the leadership of the Jiangxi Provincial Government, the assets of Changhe after the spin-off in Jingdezhen and Jiujiang are the same as those of Jiangxi Province. Automobile company - Jiangling Motors carries out integration.

However, Changhe Automotive insiders told reporters that the possibility of mergers and acquisitions between Jiangling and Changhe Automobile and the result of mergers and acquisitions are not optimistic. First, the ownership relationship of Jiangling Motors is very complicated, which involves Chang'an Group and Ford Group, and the relationship between Jiangling, Ford and Changan. It is very subtle and the game is heavy, which will bring great resistance to M&A.

In December 2004, Changan officially incorporated Jiangling Motors, Changan Automobile [10.02% Capital Research] and Jiangling Group each invested RMB 500 million to form Jiangling Holdings. Jiangling Holding, which holds 41.03% of the shares of the listed company Jiangling Motors Co., Ltd. (000550, SZ), became the largest shareholder of Jiangling. Since then, Changan's support for Jiangling has been criticized by the industry, and Jiangling has retrenched Changan by deepening the partnership with Ford, especially the restart of the car business.

It is not difficult to judge that the attributes of Jiangling and Changhe, as well as the status of Jiangling as a listed company, have determined that the reorganization of JMC and Changhe Automobile is of little significance. “Jiangling is a local state-owned enterprise, and Changhe has a background of central enterprises. Even if Jiangling is willing to take over Changhe, it cannot achieve substantial control. Moreover, JMC is a listed company. Changhe has not achieved losses in the past two years, and the inclusion of this asset will only increase Jiangling Motors’s Asset-liability ratio," said people familiar with the matter.

In fact, as early as Changhe and Chang'an disagreement, the Jiangxi provincial government intends to let Jiangling take over the Changhe business. Jiangling, which has taken over Taiyuan, is not willing to add another burden. On January 8 of this year, Jiangling Motors purchased 100% equity of Taiyuan Heavy Duty Truck, merged and reorganized Taiyuan CNHTC, and Jiangling Heavy Duty Trucks Co., Ltd. was established.

What is important is that any mergers and reorganizations require the reorganization of the management of both parties to have a very strong desire, and the reorganization of the two parties is highly complementary. At present, the core product of Jiangling Holdings is its own brand, Landwind Passenger Vehicle, but its sales have been tepid.

Jiangling shares its focus on Ford's technology, focusing on the four major series of light passengers, light trucks, pickup trucks and SUVs. Currently, it is eager to rely on Ford's support to restart the sedan project, and the significance of Changhe Automotive's mini vehicle field for Jiangling is yet to be discussed. However, based on the existing mini-vehicles, BAIC's role in the acquisition of Changhe's large micro-vehicles is obvious.

It is also very important for the M&A party to provide what kind of support in the name of M&A. “One of the reasons why the Changan Group failed to acquire Changhe Automobile was that Changan had acquired the name in the name of the Group and had no financial and technical support for Changhe,” said Changhe.

Obviously, Jiangling is hard to provide Changhe with more help in terms of technology and funding. The combination of Jiangling and Changhe, it is difficult to achieve the effect of "1+1>2".

Reasons for Beiqi's entry

Xu Heyi’s early recognition of Changhe Automobile was well known five years ago. Afterwards, for various reasons, Chang’an Automobile, which belongs to the Military Corps Group, was finally ordered to take over Changhe.

But stubborn Xu Heyi did not completely let go. He not only hired former Changhe Automobile General Manager Cai Suiping to replace Tong Zhiyuan, the former deputy general manager of BAIC Motor, from Changhe in 2008. After Changhe was reorganized by Changan, he also sincerely invited Changhe Automobile Deputy General Manager Ji Guanghua to join BAIC. These two figures made great contributions to the plan of Beijing Automobile to reacquire Changhe again.

In 2012, Changhe Automobile protested with a strike due to hearing that China Chang'an plans to transfer Changhe Suzuki's production qualification to Changan Mazda on the basis of integrating Changan Suzuki and Changhe Suzuki. Although the relationship between the two parties has eased, Chang'an has actually lost jurisdiction over Changhe.

On April 20th this year, Changhe Suzuki, who was an independent exhibitor at the Shanghai Auto Show, demonstrated its “autonomy” attitude in the form of a dual-brand strategy. At this time, Chang’an and Changhe have already shown themselves. At this time, Beiqi’s plan to acquire the Southeast Auto was defeated, and in the east, Fujian’s Changhe Automobile, located in southeastern China, once again entered Xu’s eyes. This is a blank space that Beijing Automobile has not yet entered.

Prior to this, BAIC successively completed a balanced strategic layout in four directions: Zhongnan Zhuzhou, South China Guangzhou, Southwestern Chongqing, and North China Beijing through mergers and self-construction. However, in the fertile southeast region, BAIC never had a "base."

The geographic location of Changhe Automotive is of great strategic importance to BAIC. It connects Guangdong to the south and connects Hunan to the west. It can run through Beiqi's two bases in South China and South China. In particular, Changhe Automotive's micro-vehicle matching technology on engines and transmissions is exactly what Beiqi Zhuzhou Microcar Base needs.

“Beiqi’s acquisition of Changhe will not only qualify Changhe Suzuki’s automobile production qualifications, but also indirectly cooperate with Suzuki’s vehicles to fill gaps in the production of small vehicles. At the same time, it will also be able to obtain Changhe’s production technology in the micro-vehicle field, further increasing Beiqi's mini-vehicle sales, said people familiar with the matter, said the key point for mergers and acquisitions is whether the Jiangxi provincial government is willing to accept Beiqi.

Chang'an "Catching and Cao"

With the expansion of Beiqi, Changan is shrinking its sphere of influence. “In order to ensure the growth of profits on the financial statements, Chang’an has given up its aggressive strategy expansion three years ago. Instead, it has selectively focused on supporting certain companies and giving up certain companies.” Informed sources said that in this release On the list, apart from Changhe Motors, there was cloud power that fell shortly before the cooperation.

In fact, since Chang'an was ordered to assemble Hafei and Changhe from AVIC in 2009, the “three arrows” strategy envisioned by China Chang’an has never really been realized. Apart from taking several of its own products to OEM production at Hafei and Changhe, Chang’an’s sales performance has not yet shaken off a loss-making quagmire.

According to relevant statistics, in 2011 and 2012, Hafei Motor’s monthly sales volume was less than 1,000 units, and most of the production capacity was idle. Changhe, after the strike, had “tearned” with China’s Chang’an and was already in autonomy. The integration plan for Changhe Suzuki and Changan Suzuki designed by Chang’an for Changhe has also been lost, which has directly led to the estrangement of relations between Suzuki and Chang’an.

Changan once promised the China Securities Regulatory Commission that when Hafei and Changhe have two consecutive years of profitability, the assets of the two auto companies will be injected into Changan Automobile, a listed company. Now that three years have passed, Hafei and Changhe have become a heavy psychological burden on Chang'an. In order to prevent listed companies from being dragged by it, Changan must take action as soon as possible.

According to the reporter's understanding, after Changhe was “independent”, the fate between Chang’an and Jiangxi was not cut off. Changhe Automobile currently has two vehicle production qualifications, one owned by Changhe Suzuki and one owned by Hefei Changhe. Changhe Suzuki has two production bases in Jingdezhen and Jiujiang. It mainly produces Suzuki brand cars, and Hefei Changhe mainly produces Changhe's own brands of Fortune, Freita Microfacets, and Freda's single and double row cars.

As a result of negotiations between Changan and Jiangxi, Changhe Suzuki’s two vehicle production bases, engine factories and production qualifications in Jingdezhen and Jiujiang were divested; and Changhe’s production base and qualifications still belonged to Chang’an. In the future, Changan will introduce its own model into Hefei, which will transform Changhe Hefei into Changan's production base in Hefei. The Changan products will be reinjected. Changhe models originally produced will try to return to Jiangxi and may be included in the name of Beiqi.

“Relocating Hefei Changhe to Chang’an is not a kind of compensation, but an already existing strategic plan.” People familiar with the matter said that at the time of reorganization in 2009, Changhe, Hefei, gave up its signing related to AVIC because of high land prices. Strategic cooperation letter of intent. The Hefei municipal government is not willing to give up this opportunity to reorganize, and said separately to Chang’an that it is possible to grant Changan to Hefei Hi-tech Park as a strategic base for Chang’an in Hefei.

At the beginning of July this year, Han Bing, Standing Committee member of the Hefei Municipal Party Committee, and Deputy Mayor Han Bing met with Vice President of China Chang'an Lian Gang. “We hope to further maintain close cooperation with the Chang'an Group, accelerate the construction of the base, and create a new situation for the win-win situation of central enterprises and local cooperation.” At this time, Changhe’s independent plan for splitting into two has already taken shape.

“After releasing the Changhe Jingdezhen and Jiujiang bases, Chang’an will accelerate the promotion of Ford’s entry into the northeastern region and use the joint venture between Ford and Hafei to activate three factories in Northeast China, Hafei Automobile, Dongan Power [1.62% Funds Research Report] and Dongan Mitsubishi. The Changan PSA and Changan Mazda, which were established shortly afterwards, were prepared to do their best to transfer the assets of the latter two companies to Changan Automobile, a listed company. People familiar with the matter said that now Chang’an’s idea is that it is not as good as breaking the finger.

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