After more than a year of twists and turns, the reorganization drama of Haier Bio and Shanghai RAAS ended in termination.

On the evening of January 6, 2025, both parties successively issued announcements on the resumption of trading of the company's stocks. Looking back on this merger and acquisition, the eye-catching thing is "snake swallowing elephant". On December 20, 2024, Haier Bio and Shanghai RAAS signed the "Absorption Merger Intention Agreement". Based on the closing stock price of the day, the market value of the two companies was approximately 11.2 billion yuan and 47.9 billion yuan respectively.

Regarding the reason for the termination, Haier Bio announced that the transaction structure was relatively complex, and after repeated discussions and consultations among all parties, a specific plan recognized by all parties concerned has not yet been formed. In order to effectively safeguard the interests of listed companies and investors, the two parties decided to terminate.

According to public information, Haier Bio was founded in 2005 and listed on the Science and Technology Innovation Board in 2019. The company is a digital scenario solution service provider for life science and medical innovation based on the transformation of the Internet of Things. It mainly focuses on life sciences, primary public health and other fields, and provides comprehensive digital scenario solutions such as smart experiments, digital hospitals, smart public health, and smart blood use.

Shanghai Laishi is mainly engaged in the production and sales of blood products. Its main products are human serum albumin, intravenous human immunoglobulin, specific immunoglobulin, coagulation factor products, etc. It is currently one of the largest blood product manufacturers in China.

From the perspective of the main business alone, the two companies have some overlap in business, but the correlation is not strong. Putting aside the difficulty of swallowing up, even if the M&A transaction is successful, the subsequent integration empowerment and business synergy, whether 1+1 can be greater than 2 is still a serious test question.

1
Gross profit margin continues to decline
Over 10 billion yuan of floating loss of 20%
Dilemma?

In fact, if the vision is extended, the reorganization of the two companies did not surprise the market much.

On December 29, 2023, Shanghai Laise issued an announcement on the change of controlling shareholders and actual controllers. On the same day, the original controlling shareholder Gilford signed a "Strategic Cooperation and Share Purchase Agreement" with Haier Group. Haier Group or its designated affiliates intend to acquire 1.329 billion shares of Shanghai Laise held by Gilford by agreement, with a transfer price of 12.5 billion yuan. In addition, Gilford also entrusted the remaining 6.58% of the company's voting rights to Haier Group or its designated affiliates for exercise, and Haier Group obtained a total of 26.58% of the voting rights.

On January 21, 2024, after consultation with Gilford, Haier Group designated its wholly-owned subsidiary Haiyingkang as the successor under the above agreement, and the three parties re-signed the "Revised and Restated Strategic Cooperation and Share Purchase Agreement".

On July 29, 2024, Shanghai Laise held an extraordinary shareholders' meeting and completed the election of the board of directors. Haier Group won another victory. Among the 9 directors of the board of directors, Haiyingkang controlled more than half of the seats. Combined with the current shareholding situation of shareholders, after careful judgment, the company's controlling shareholder was changed to Haiyingkang, and the actual controller was changed to Haier Group.

It can be seen that Haier Group is determined to acquire Shanghai RAAS. The main raw material of blood products is plasma. At present, all links in my country, from plasma collection to blood product production and sales, are strictly regulated. In 2001, the state implemented total control on the blood products industry, and the growth of practitioners was mainly achieved through external mergers and acquisitions.

As one of the largest blood products companies in China, Shanghai RAAS is no exception. In 2013, it acquired 9.90% of the shares of China Biological Products Co., Ltd.; in 2014, it successively acquired 100% of the shares of Zhengzhou Banghe Biopharmaceutical Co., Ltd. and 89.77% of the shares of Tonglu Biopharmaceutical Co., Ltd.; in 2017, it again acquired 100% of the shares of Yeji Green Cross Single Collection Plasma Station Co., Ltd., 100% of the shares of Huainan Maoji Green Cross Single Collection Plasma Station Co., Ltd., and 100% of the shares of Huaiyuan County Green Cross Single Collection Plasma Station Co., Ltd. From 2018 to 2023, the company successively acquired 45% of the shares of Grifols Diagnostic lutions Inc., 95% of the shares of Guangxi Guanfeng Biological Products Co., Ltd., and so on.

With a series of purchases, Shanghai Laishi quickly became a leading company in the industry, with its market value soaring from 6 billion to 120 billion yuan, becoming a leading company in blood products. However, the disadvantages derived from it have gradually emerged, such as the rapid increase in the company's goodwill. By the end of the third quarter of 2024, it reached 5.073 billion yuan, a year-on-year increase of 7.88%.

Industry analyst Wang Yanbo believes that goodwill is a "double-edged sword". On the one hand, it represents the vitality and growth potential of the company's development, and on the other hand, it also considers the quality of the target, the subsequent integration and empowerment capabilities, and even the market environment. If the comprehensive operational capacity is insufficient, it may lead to goodwill explosion, and then the performance will decline or even drag down the main business.

In addition to the goodwill risk, Shanghai Laishi's profit growth rate has fluctuated greatly in recent years, and its stability needs to be improved. Wind data shows that from 2021 to the first half of 2024, the company's revenue was 4.288 billion yuan, 6.567 billion yuan, 7.964 billion yuan, and 6.314 billion yuan, respectively, up 55.26%, 53.16%, 21.27%, and 6.39% year-on-year. Net profit in the same period was 1.295 billion yuan, 1.880 billion yuan, 1.779 billion yuan, and 1.241 billion yuan, up -2.21%, 45.24%, -5.35%, and 0.15% year-on-year, respectively.

In-depth business, blood products are the absolute main force, with production and sales revenue accounting for 99.93%, 99.05%, 98.21%, and 98.80% respectively in the same period. Gross profit margins were 51.85%, 44.39%, 41.03%, and 40.88%, respectively. Wind data shows that from 2019 to 2021, the gross profit margin of Shanghai RAIS's main business was 66.74%, 64.15% and 61.98% respectively.

Regarding the continuous decline in gross profit margin, Xu Jun of Shanghai RAIS once said that the overall gross profit margin will decline in 2023, mainly because the weight of agency business has increased compared with the previous year, and the US dollar exchange rate has risen during the same period. The company's related-party transaction business involves import trade, and the business is mainly settled in US dollars, which has a certain exchange rate fluctuation risk.

In the first three quarters of 2024, Shanghai RAIS's gross profit margin was 40.64%, a year-on-year decrease of 1.28 percentage points; the net profit margin was 29.12%, a year-on-year decrease of 0.97 percentage points. The gross profit margin in the third quarter was 40.13%, a year-on-year decrease of 0.57 percentage points and a month-on-month decrease of 1.92 percentage points; the net profit margin was 28.97%, a year-on-year increase of 2.05 percentage points and a month-on-month increase of 6.93 percentage points.

In the first three quarters, the company's revenue was 6.314 billion yuan, a year-on-year increase of 6.39%; the net profit attributable to the parent company was 1.838 billion yuan, a year-on-year increase of 2.81%, which was the only double-digit increase in profits in the same period in the past five years. The net cash flow generated by operating activities was 516 million yuan, a year-on-year decrease of 73.43%, and the volume was also the lowest in the same period in the past five years.

As of January 13, Shanghai Laishi closed at 6.62 yuan, a cumulative drop of nearly 30% from the above-mentioned entry price of 9.40 yuan of Haier Group. Haier's floating loss on this transaction exceeded 3 billion yuan.

Obviously, the failure of this merger and acquisition is not abrupt. However, combined with the previous firm entry actions, the further integration of the two companies is also a must. After experiencing the decline in stock prices and the failure of restructuring, whether Haier Group is in a dilemma and how to deal with it in the future, a series of questions have attracted the attention of the outside world.

2
Profits have fallen continuously and major shareholders have reduced their holdings
Beware of the sequelae of mergers and acquisitions

After all, Haier Bio's life is not bright either.

Unlike Shanghai Laishi, which focuses on blood products, Haier Bio's business is more diversified. At the beginning of its establishment, relying on the brand endorsement and resource support of Haier Group, the company quickly emerged in the field of biomedical low-temperature storage equipment. In the early years, it focused on the research and development and production of medical refrigerators, ultra-low temperature preservation boxes and other products, breaking the foreign technology monopoly with excellent quality and relatively affordable prices. In October 2019, it landed on the Science and Technology Innovation Board with the halo of "the first stock of IoT biomedical".

With the expansion of financing channels, Haier Bio has embarked on the road of business expansion, such as the acquisition of plasma collection business in 2020, the acquisition of public health information business and laboratory consumables business in 2022, and the inclusion of pharmacy automation business in 2023. The heart of becoming bigger and stronger is beyond words.

The consideration is that after a series of purchases, the company's performance has not improved much, and the profit level has declined. From 2021 to 2023, Haier Bio's revenue was 2.126 billion yuan, 2.864 billion yuan, and 2.281 billion yuan. Net profits were 845 million yuan, 601 million yuan, and 406 million yuan, falling by half for two consecutive years.

In the first three quarters of 2024, Haier Bio's revenue was 1.782 billion yuan, a year-on-year decrease of 2.43%; net profit attributable to the parent was 309 million yuan, a year-on-year decrease of 13.45%. Net cash flow from operating activities was 114 million yuan, a year-on-year decrease of 31.96%.

Regarding the decline in performance, Haier Bio said in an institutional survey that the performance pressure in the first three quarters of 2024 was mainly affected by the decline in low-temperature storage business. Among them, the domestic market was mainly affected by the decline in ultra-low temperature and constant temperature storage products, and the decline in major vaccine programs in overseas markets.

Looking at the expenses, Haier Bio has been working hard. The sales expense rate increased from 11.95% in 2020 to 14.9% in 2023. The management expense rate increased from 5.07% to 8.03%. R&D investment increased from 10.75% to 14.06%, but the overall conversion rate of results is not high. Judging from the above performance, many investments have not yet formed considerable profitability.

Industry analyst Sun Yewen said that diversified cross-border layout can bring more growth space and value imagination, which is a reflection of the vitality of enterprise development, but it also brings more investment, more competitive products, more professional characteristics, and quality control and risk control requirements. Once the steps are too big and too fast, beyond the control ability, or the correlation between the new business and the main business is not strong, and the collaborative management ability is insufficient, blindly chasing hot spots is likely to lead to the hidden worries of inflated M&A assets and large fluctuations in company performance and stock prices. Judging from Haier Bio's performance, while it is expanding its capacity, it needs to be vigilant against the risk of sequelae of radical expansion. In particular, combined with the decline in operating cash flow and slowing performance growth of Shanghai Laishi, the development quality and financial health of the two companies need to be further examined to prevent the possibility of M&A sequelae.

Not too demanding. As of the third quarter of 2024, Haier Bio's goodwill balance was 758 million yuan, an increase of about 68 times from 10.6694 million yuan in 2016. In terms of stock price, as of January 13, 2025, it closed at 31.31 yuan, a cumulative drop of nearly 80% from the historical high of 150.88 yuan. TTM price-earnings ratio is 27.81.

The fundamentals have not improved significantly, and the stock price fluctuations have naturally worn away the patience of shareholders. On August 13, 2024, Haier Bio announced that shareholder Qijun Investment reduced its holdings of the company by 6.3591 million shares on August 13, accounting for 2% of the total share capital. After the transfer is completed, the shareholding ratio dropped to 4.19%.

This is not the first time Qijun Investment has made a move. Haier Bio's prospectus shows that when the company went public in October 2019, Qijun Investment was the second largest shareholder, with a shareholding ratio of 20.25%. Since 2020, the company has been reducing its holdings frequently, and its shareholding ratio has dropped to below 5% by the end of the third quarter of 2024.

In addition, Hong Kong Central Clearing Co., Ltd., which represents overseas investors, also reduced its holdings in 2024. The 2023 annual report shows that Hong Kong Central Clearing Co., Ltd. held 8.92% of the shares at the end of that year. By the end of the third quarter of 2024, it had dropped to 4.27%. Whether the company's future profit prospects are pessimistic is a matter of opinion. What is certain is that this should not be a plus for the confidence of stable small and medium-sized investors.

3
What are the lessons from the failure of "snake swallowing elephant"?

Of course, the two companies did not sit still and wait for death. Taking the failure of this restructuring as an example, in order to stabilize investor confidence, Haier Bio and Shanghai RAAS both disclosed their share repurchase plans on January 6. Among them, Haier Bio Chairman Tan Lixia proposed that the company repurchase 100 million to 200 million yuan; Shanghai RAAS Chairman Tan Lixia proposed that the company repurchase 250 million to 500 million yuan.

Real money investment is precious and worthy of recognition. However, at least combined with the current stock price trends of the two companies, the repurchase seems to have limited boost to market confidence.

From the perspective of the capital environment, under the support of relevant policies, the current A-share market is in an active period of mergers and acquisitions. The termination of Haier Bio will also have a certain reference significance for the market:

First, mergers and acquisitions need to be tailored to the needs and should not be rushed. Although Haier Group is the actual controller of Shanghai RAAS, its voting rights are only 26.58%, not even one-third. In addition to Haier Group, there are three state-owned legal persons and two foreign legal persons among the top ten shareholders of Shanghai RAAS.

Secondly, there are challenges in business integration after mergers and acquisitions. Capital is not a panacea. If Haier's related businesses lack synergy, the boost to Shanghai RAAS's main business will be limited. In the absence of sufficient risk premium, it will be difficult to impress the original shareholders of Shanghai RAAS.

Finally, looking at the recent acquisitions of "snake swallowing elephant" such as Wingtech Technology's acquisition of Nexperia, Tianqi Lithium's acquisition of SQM shares, and Nasda's acquisition of Lexmark, the mergers and acquisitions have all been questioned to varying degrees over time.

Industry analyst Wang Tingyan said that Shanghai RAAS's market value is several times that of Haier Bio, and its operating scale and profitability are also several times that of Haier Bio. In addition, Haier Group has been the actual controller of Shanghai RAAS for less than half a year. If there is a lack of effective communication with all parties, it is easy to fail if the reorganization is hastily proposed. The capital market has always been a game for the brave, and there are many successful cases of snake swallowing elephant mergers and acquisitions. However, based on past experience, companies with huge goodwill impairment almost all planted the seeds of disaster during asset restructuring and asset acquisitions. It is not easy for a small fish to swallow a big fish. If the operation is not careful, it may also be buried in the belly of the fish.

4
Dabao Mine and Good Miners
Work hard on internal skills and wait for spring

As the old saying goes, misfortune is the root of blessing.

For Haier Bio, suspending reorganization is not necessarily a bad thing. It would be a blessing if it can focus more on improving endogenous driving force.

In recent years, the market demand for temperature-sensitive drugs such as biological preparations and APIs has been rising. According to QYResearch data, the global aviation temperature-controlled cargo box market size is expected to reach US$990 million in 2029, with a compound growth rate of 7.2% in the next few years.

Under huge demand, temperature-sensitive drugs have higher requirements for the aviation temperature-controlled logistics that they rely on in terms of infrastructure, link control, temperature control equipment, and emergency support capabilities. The huge market size and policy advocacy support have given the aviation temperature-controlled logistics industry a broad development space and also provided Haier Bio with new development opportunities.

As early as 2021, Haier Bio actively laid out a new ecology of the aviation temperature control industry and established Honghu Aviation Technology, which is committed to providing users with green aviation temperature control solutions covering the entire life cycle of R&D, production, operation and maintenance, and fully integrating efficient temperature control technology with environmental protection.

Taking the temperature control technology solution created by its independent research and development technology as an example, it has provided services to many well-known pharmaceutical customers in Europe, North America and Asia-Pacific, successfully completed multiple biomedical intercontinental transportation tasks such as "Shanghai-Chicago" and "Frankfurt-Shanghai", and gradually built an aviation temperature control logistics service ecology covering China-Europe, China-America and other places.

What is even more valuable is that in order to better keep pace with the international standards, Honghu Aviation Technology actively participates in relevant regulations and certifications. It has become the first domestic company with the qualifications for the R&D, manufacturing and maintenance of aviation temperature-controlled containers, and has been awarded the CCAR-145 "Maintenance License".

The long slope and thick snow show that Haier Bio holds a treasure mine, and many good cards are worth playing thoroughly. Be a real miner. For enterprise development, external expansion and internal growth are two major driving forces, but in the final analysis, internal growth is king. Only by digesting and absorbing external business, integrating and coordinating well, stimulating more internal growth forces, and walking the "balance beam" of volume and quality, expansion and expertise, can enterprises truly move forward steadily and become bigger and stronger.

As of the first three quarters of 2024, Haier Bio's monetary funds were 984 million yuan, a year-on-year decrease of 23.4%; total liabilities were 1.1 billion yuan, a year-on-year increase of 2.33%. Combined with the double decline in profits, the decline in sales expenses, management expenses, R&D expenses, and financial expenses, as well as the performance of Shanghai RAAS, termination may be a wise choice.

Sometimes, slow is fast and fast is slow. I hope that after the failure of "snake swallowing elephant", Haier Bio and Shanghai RAAS can practice internal skills and stimulate more solid internal growth. In the end, the internal growth and external growth will merge into one as desired, which is also a natural thing.

https://news.qq.com/rain/a/20250113A09CUA00