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What about the continuous acquisition of 2 loss-making companies by Fengle Seed?


The Beijing News reporter learned today that Hefei Fengle Seed Industry Co., Ltd. (referred to as “Fengle Seed Industry”) has issued an announcement that the company and its subsidiaries The shareholding acquisition of Yunnan Quanao Agricultural Technology Co., Ltd. (“Yunnan Quanao”) has been completed. At present, Lefeng Seed Industry’s shareholding in Hunan Jinnong has increased from 51% to 82.5%, while its wholly-owned subsidiary Sichuan Tonglu Agriculture has 100% control of Yunnan Quanao.

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The Beijing News reporter noted that Hunan Jinnong has suffered losses for two consecutive years, while Yunnan Olympics has suffered losses for three consecutive years, with revenues of less than one million yuan for three years. Why is Fengle Seeds, which has a market value of nearly 5 billion yuan, acquired two loss-making seed companies in one go? Experts said that from a strategic point of view, new technologies and new markets are planned to be acquired through acquisitions. However, the current concentration of the seed industry market is high. For ordinary varieties, the acquisition is of little significance and the influence of small regional companies on the market is also limited.

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Two acquisitions made consecutive losses

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According to the announcement, Hunan Jinnong was established in May 2005, mainly engaged in the research and development, production and sales of hybrid rice seeds, with a registered capital of 30 million yuan. In January 2016, Fengle Seed Industry acquired 51% equity of Hunan Jinnong through purchase and became its controlling shareholder. This time Fengle Seed Industry acquired a 31.5% stake in Hefei Huachun Investment Consulting Co., Ltd. for RMB 49.964 million, and its controlling share rose from 51% to 82.5%. At present, the registration procedures for industrial and commercial changes have been completed.

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It is worth noting that Hunan Jinnong has been in a loss for the past two years. Although the revenue in 2018 and 2019 was 12.4038 million yuan and 10.758 million yuan, but the net profit lost 453,700 yuan and 263,500 yuan respectively. Fengle Seeds said that the company’s acquisition of a 31.5% stake in Hunan Nongda Jinnong Seeds Co., Ltd. can further enhance its control over Hunan Jinnong and benefit the company’s management and the realization of future development goals.

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The acquisition of Yunnan Quanao was established in February 2017, with a registered capital of only 1 million yuan, and is mainly engaged in the sale of agriculture and flower seeds. According to the disclosed information, Sichuan Tonglu Agriculture, a wholly-owned subsidiary of Fengle Seed Industry, acquired a 40% stake in Yunnan Quanao held by Chen Shaohua for 6.895 million yuan, and has completed the industrial and commercial change procedures. Sichuan Tonglu Agriculture holds 100% equity in Yunnan Quanao .

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The Beijing News reporter noted that in the past three years, the Yunnan Olympic Games have been in a state of loss. In 2017, the revenue was only 10,000 yuan, and the net profit loss was 690,400 yuan; in 2018, the loss was 570,400 yuan; in 2019, the revenue was 216,600 yuan, and the net profit loss was 67,000 yuan. For this acquisition, Fengle Seed Industry previously stated in the announcement that Yunnan Quanao has the most systematic and cutting-edge maize variety tropical blood research materials in Southeast Asia. The acquisition can give full play to the role of materials in scientific research and ensure materials The safety and integrity of the company maximizes the company’s interests.

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Acquisition or acquisition of better varieties

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According to Tianyancha information, Fengle Seed Industry was established in 1997, with seed industry and agrochemical as the main business, as well as spice and hotel business. The controlling shareholder is Hefei Construction Investment Holdings (Group) Co., Ltd., with a shareholding ratio of 29.24%, and Hefei Construction Investment is a 100% holding company of Hefei SASAC.

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The financial report shows that in 2019, Fengle Seed Industry’s revenue was 2.404 billion yuan, an increase of 23.75% year-on-year; the net profit was 57.2229 million yuan, an increase of 7.59% year-on-year. However, a reporter from the Beijing News noticed that Fengle Seed Industry deducted a non-net profit of 42.0206 million yuan last year, a year-on-year increase of 171.87%. For the reasons for the double growth of revenue and net profit, Fengle Seed Industry said that it was due to its focus on the two main industries of seed industry and agrochemical last year. Among them, the digestive stocks of the seed industry have achieved significant results, the risk of rice seed stocks has basically been released, and the corn seed stocks have been effectively controlled.

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As of the close of May 19, Fengle Seed’s stock price fell by 1.5% to close at 11.17 yuan per share, with a market value of 4.899 billion yuan. Or this year, the seed industry is generally favored by the industry. Since the beginning of the year, Fengle Seed’s stock price has risen 33.22%.

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Fengle Seed Industry, whose market value has reached nearly 5 billion, why buy two loss-making companies in one go?

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On May 19, a person in the seed industry analyzed the reporter of the Beijing News that from the perspective of corporate strategy, the seed industry acquired the company mainly for technology, variety, profit or market. For example, Hunan Jinnong is more advanced in hybrid rice seeds, while Yunnan Quanao has an advantage in corn seeds grown in the tropics. From “North” to “South”, it can acquire varieties with better adaptability through acquisition. Can obtain customer resources, can accelerate market expansion.

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“Sometimes the acquisition does not necessarily depend on the performance, whether there is a more advanced technology. However, the current concentration of the seed industry market is very high. If it is an ordinary variety, the acquisition is of little significance; and Yunnan Quanao is also a small regional company. The influence is also limited. “Industry sources added.

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The Beijing News reporter noted that Fengle Seeds stated in its 2019 annual report that the corn seed industry is gaining momentum and has a significant integration effect with the acquired companies, realizing the overall planning and layout of the corn industry across the country.

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Beijing News reporter Ouyang Xiaojuan

Editor Zhu Fenglan Proofreading Li Ming

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