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How Does BELLE'S Newly Listed M & A Fund "Add Icing On The Cake"?

2020/1/19 12:23:00 0

BELLE

How to improve asset value and re listing after the privatization of stock market has been an important topic of continuous concern in the financial market.

This is related to how a company repositioning itself and resurgence. It is related to how to get through the financing capital chain and achieve market cashing within a certain period of time, which is related to the reconstruction of the rights of management, shareholders and market (customers).

According to incomplete statistics, since November 2018, at least 15 Hong Kong share listed companies have announced privatization, and at least 10 companies have completed privatization delisting, all of which have reached a new high in recent years. In 2010~2018, there were 43 privatization cases among Hong Kong stocks, of which 35 were successful privatization.

After the privatization of listed companies, most companies will seek to realize the transformation, splitting and integration of listed companies, unless they choose to stop listing in the short run.

BELLE is no exception.

After the delisting of BELLE in 2017, it took only two years as a privatization trader's high leverage capital to split the BELLE international business, which was launched into Hongkong's capital market, and exceeded the amount of privatization at the beginning of the listing.

Although it was 88% of the assets and liabilities ratio, frequency and brand dependence, the market was full of worries. However, in the context of the current economic uncertainty, BELLE's repositioning, market transformation and the golden touch of the "high-tech" behind the capital have a good reference value, and the challenges and risks faced by the newly listed BELLE are also worth learning from.

Privatization

30 billion 200 million yuan pieces of capital buried

In 2007, the first BELLE listed in Hongkong, China, maintained its high speed development for six or seven years. In early 2013, the market value of BELLE once exceeded 150 billion yuan, creating a market myth in the field of shoes and clothing, not only one of the 50 constituent stocks of Hongkong Hang Seng Index, but also the blue chip company of Hongkong's first mainland company.

However, after 2013, the industry watershed appeared, and BELLE began to reveal its own problems. Net profit fell, and its share price also dropped from HK $18 per share in 2013 to HK $4, and its market value shrank by nearly 80%. According to the data from Euromonitor and Huatai Securities Research Institute, the market share of BELLE women's shoes business reached its peak in the middle of 2013, and it was 13%. After that, its market share declined year by year, and its market share was only 6.4% in 2018.

In July 27, 2017, BELLE International announced that the proposal for privatization came into effect and revoked its listing status on the stock exchange of Hongkong. Privatization of listed companies is a mode of operation in the capital market. Under normal circumstances, controlling shareholders buy all the shares of small shareholders and eventually withdraw the company from the stock exchange.

Statistics show that after privatization, high allocating capital will become BELLE's controlling shareholder, holding 56.81% of its shares. CDH investment holds 12.06% of its shares. Some management departments hold 31.13% of their shares through the SW venture platform.

For BELLE, CDH is no stranger to it. As early as BELLE's first listing, Ding Hui invested tens of millions of HK dollars as a financial investor and Morgan Stanley's two fund companies to invest in BELLE, and shared BELLE's first successful listing. In 2013, CDH and BELLE jointly acquired the Japanese Baroque group, which owns several garment brands, which was listed on the Tokyo stock exchange in 2016.

However, in the privatization process of BELLE, Gao Ling played a more important role. As the largest hedge fund in Asia, the privatization of stock participation is one of the investment strategies of high leverage capital. It has also participated in the privatization of many listed companies, such as Zhaopin, Iqiyi, etc.

Some analysts pointed out that "unlike the above cases, the shareholding ratio and voice power of previously privatized enterprises in high leverage were in the hands of the management team, while high allocating capital is more a participant, while in the privatization process of BELLE, high leverage capital is a controlling shareholder and has a stronger voice."

So why does Gao Ling retain control in the process of BELLE privatization? What does this mean for capital?

"Capital choice has control rights, a very important purpose is" AnaI "conducive to" exclusion ", especially in the initial stage of privatization. Centralization of power is beneficial to operation, which not only reduces communication costs, but also avoids disputes and negative effects, especially showing confidence of large shareholders to the outside world, which, of course, also leaves behind for the determination of price withdrawal prices in the future. Fan Bosong, a Beijing law firm, told the China business newspaper reporter.

At the same time, "the founder of BELLE is very old, and hopes to achieve the goal of retirement through privatization cash. It can no longer be a continuous operator, nor can it buy the shares in the market at a high price. In this way, there are two choices for the high positioned capital of BELLE core assets, or the introduction of new industrial operators, or the opening of their own business." People familiar with the matter told reporters.

Obviously, Gao Ling capital chose the latter, which originated from an early insight into the path of BELLE's future transformation. BELLE's problem lies not in the industry itself, but in the re building of business models and the introduction of new high-tech elements. Grafting high tech resources is precisely the expertise of high positioned capital in this field of investment.

In fact, it can be seen from the speech delivered by Zhang Lei, founder of high alpine capital, after a privatization of BELLE.

In terms of cash flow, Zhang Lei said, "BELLE now sells about 65000000 pairs of shoes a year, plus about 35000000 items of clothing sales, with sales of about 40000000000 yuan, and EBITDA (profit before tax depreciation and amortization) about 6000000000 yuan." Obviously, people who can figure it all understand that this is equivalent to billions of cash flows a year.

In terms of supply chain, "BELLE has achieved the participation and coverage of vertical integration of women's shoes from the top design, leather procurement, production and processing, transportation and distribution to terminal retail, and BELLE has operated more than a dozen brands with different customer base and price at the same time, which is unique among women's footwear enterprises in the world."

In terms of store network, Zhang Lei thinks that BELLE has more than 13000 stores of women's shoes, more than 7000 stores of sports shoes and clothing, and has realized comprehensive self-management, management and control. It should be regarded as the top retail network in China and even in the whole world.

User scale is an important dimension for Zhang Lei to value BELLE's future value. Obviously, with the increasing cost of online traffic acquisition, the traffic entry is moving from line to line. BELLE's more than 20 thousand line outlets' traffic entry is particularly valuable.

"We have made an estimate that the number of direct shops in BELLE is about 6000000 per day, according to the Internet concept, which is 6 million of DAU (the number of active users per day), which ranks the top in Internet companies." Zhang Lei said.

As a result, a capital organization has completed the valuation of the future value of a market with a double declining market value and paid nearly 30 billion 200 million yuan for the privatization of its own dominance.

Location

Repositioning of Split transformation

As we all know, an important reason for the privatization of listed companies is that their valuation is too low, which is not conducive to refinancing. In order to enhance the valuation of enterprises, enterprises after privatization should consider the division, integration and relocation of businesses.

"Generally speaking, when capital decides to take part in privatization of a listed company, it is often determined that the business model of re listing will be established. Even the window period for re listing has been well understood. For example, Morgan, the date of their listing in the evaluation model will be quite accurate. Because listing at the highest premium in the shortest time means the highest capital efficiency. " Gu Qinhua, a Canadian lawyer who had done wealth for Jewish families, told reporters.

Gao Ling has repositioned BELLE after privatization. Zhang Lei, who is familiar with the trend of industrial development, thinks that the hottest eco circle and the hottest product all focus on the UI (user interface) + UE (user experience), while BELLE owns the more than 20 thousand Direct stores, which are equivalent to the best UI and UE. What BELLE needs is to build a new capability circle, use high-tech technology to empower it, and then provide consumers with the services they want.

Obviously, what Zhang Lei wants to do is to give the best products and best services to consumers at the most suitable time and the most suitable scene. In the middle, we need to select and split BELLE's products and services, and we need to establish a data base for consumers' discovery and touch to enhance their operational efficiency.

Gao Ling finally chose the field of sports shoes and clothing as a breakthrough point, because in the background of the watershed of the footwear industry in 2013, the market share of BELLE shoes dropped straight from 13% to 6.4% in 2018. But on the other hand, sports shoes and clothing have entered a high growth stage, from 2014 to 2018, the average compound growth rate is 12%, far higher than the overall shoe and clothing market of 5%.

Specific to BELLE, its international business line has the first domestic market share in the field of sports shoes and clothing segmentation. In 2018, its retail sales reached 37 billion 500 million yuan, 30% higher than second Baosheng international, and the market share was 4.3 percentage points higher than that of the second Baosheng international.

In this case, the positioning of sports shoes and clothing has become an important starting point for BELLE to split its business. Next, as a major shareholder, the high leverage capital must do something through high-tech.

"We want to help BELLE build itself into a retail basic service provider, a company with temperature. As long as we dig deeper into this focus, we will become the most desirable brand for consumers." Zhang Lei said. The positioning of retail basic service providers undoubtedly indicates the direction of empowerment.

According to Zhang Lei's design, "we should make full use of BELLE and high Ling's existing and constantly developing big data capabilities to fully apply data and technology to consumer discovery, touch and service, and connect BELLE from front-line salesmen to headquarters, and connect them with technology. At the operational level, we also need to help BELLE build data, technology based management, decision-making, analysis systems and systems to further optimize and enhance operational efficiency."

BELLE, which is regarded as the most promising C2M model, began experimenting with new design, production and sales models. "Before the beginning of each quarter, all shoes were designed, such as the development of 400~500 SKU in each quarter. The traditional way is to calculate the proportion according to the category, plan well and redesign the designer. But this pattern can not cope with the change in the following 3 months.

The current practice is to develop 100 SKU according to the total planned amount. The rest of the week is redesigned through the calculation and capture of the trend trend, and after the small batch production is calculated, the products that are reacted evenly are removed, and then redesigned, so iterated back and forth. Hu Bing, vice president of BELLE group and general manager of BELLE brand, has told the media about BELLE's current iterative thinking.

BELLE international executive director Li Liang also put forward the "whole process data transformation" mode, that is, to provide data toolkit to enable stores to find a more suitable service mode. In Li Liang's view, "this game is interlinked with the logic of" de centralization "in the Internet industry. Many specific practices such as using RFID (electronic tag) technology to provide smart chips for shoes, and monitoring customer preferences according to data such as trial frequency and time are also in an iterative attempt.

It is precisely this way of operation that split the post to achieve brilliant results and asset value has also been significantly improved.

In October 10, 2019, Tao Po International Holdings Limited, which was split from BELLE international business line, officially landed at the Hong Kong stock exchange. Its opening price was HK $8.5, and its market value was HK $52 billion 700 million. Immediately, the international market surged 8.7%, with a total market value of HK $57 billion 100 million.

At the same time, prospectus shows that in the fiscal year 2017~2019, its revenues were 21 billion 690 million 300 thousand yuan, 26 billion 549 million 900 thousand yuan and 32 billion 564 million 400 thousand yuan respectively, and the growth rate in the past two fiscal years was 22.4% and 22.7% respectively. During the same period, the annual adjusted annual profits of Tao Bo International were 1 billion 538 million yuan, 1 billion 810 million yuan and 2 billion 237 million yuan respectively.

risk

Opportunity and risk coexist

After the re listing, Tao Po international completed BELLE's magnificent turn.

Public figures show that the world's retail network includes 8372 direct outlets across 30 provincial administrative units in 268 cities and 1957 other stores run by its downstream retailers. With its market share of 15.9%, it has become the largest retailer in China.

The operation of high altitude capital in BELLE has also changed people's view of capital as a barbarian in the industrial doorway. Especially, BELLE can be re promoted by high-tech in a very short time, leaving a brilliant conclusion for the performance of high altitude capital.

However, whether privatization and listing operations completed in a very short time will bury the risk of capital chain, especially in the current large economic environment, whether the BELLE business can still achieve sustainable development after the capital withdrawal has become a topic of concern.

Public information shows that the net income of the IPO is over 70% for debt repayment. At the same time, according to the prospectus, the company's asset liability ratio increased from 59.8% in 2016 to 88% in 2019, mainly due to a significant increase in short-term borrowing. As of September 2019, the short-term borrowing of Tao Bo has increased to around 2 billion yuan, with a weighted average annual interest rate of 4.5%. Although the assets and liabilities ratio decreased to 84.2% in the first quarter of fiscal year 2020, it is still at a higher level of debt and is related to the health of the future.

Moreover, for capital, the Hongkong stock exchange's lock up period is very short. Generally speaking, the locking period of the main board stock is only 6 months, that is, the sale of shares or the sale of shares in 6 months will result in the loss of control rights are not allowed. At the same time, the stock pledge of the stock market within 12 months is required to be announced.

That is to say, after a year, when the capital option has gone back, it will face a long-term proposition from the business side, namely, how to get rid of the brand dependence, fierce market competition and the difficulty of closing stores.

According to the prospectus data, as of the 3 months of May 31, 2019 (the first quarter of fiscal year 2020), there were 268 stores closed, and only 139 new stores opened, resulting in a 129 reduction in the number of stores. All its direct stores also fell to 8214 from 8589 in the same period in 2018.

At the same time, Nike and Adidas are the main brands of 2017~2019. They contribute more than 87% of the company's revenue every year, which means that the two party's performance in China will directly affect their revenues.

However, for these questions, Fan Bosong told reporters that a year later, capital may not completely withdraw.

"In order to maximize capital gains, they will choose to withdraw gradually, otherwise, they will not be compatible with their" controlling shareholders ". It is important to note that some managers hold 31.13% of their shares through the SW venture platform. For managers, they are dual identities. They are (indirect) shareholders and managers (laborers). They manage well the enterprises and strengthen their strength at the level of managers (workers). First, the internal management of shareholding platforms is well done at the shareholder level. Second, do well in the plan and implementation of control rights of relevant companies in the process of capital withdrawal. The three parties of the shareholders' meeting should be closely united and play their respective roles.

observation

Synergy between capital value and entity value

For a long time, the development of the real economy needs the boost of capital, but we should also guard against the hidden danger brought by the short term goal of capital to the long-term development of enterprises. This is precisely the goal pursued by the listed company governance, that is, to maximize the balance between shareholder value and long-term strategic development of the company.

Specifically, the value pursued by capital is really different from the value pursued by the real economy. Capital hopes to maximize benefits through short-term operations, so it will also be better at packaging data on asset data and grasping the main contradiction. For a solid enterprise, development is a chain of sustainability. Any risk out of control may bring long-term hidden danger to the development of enterprises.

In the case of BELLE, the high leverage capital, as a capital side, shows its unique foresight and foresight for the future development of the industry, and plays its ability to link high-tech resources. It has created the world's largest position in the field of domestic sports shoes and clothing. It is only a split business. Once it was listed, it set a market value of more than the total amount of BELLE privatization. It can be said that this is a typical case of the synergy between capital value and entity value.

Then, how can we create more such collaborative value in real economic life? Is there any trace to the latecomers about the practice of high allocating capital?

In this regard, Zhang Weiming, partner of Beijing Yinchuang investment management center, told reporters, "by integrating existing assets and businesses, we will focus on cultivating high-quality assets, technology and digitalization, then re listing, raising market capitalization and gaining profits. This is a common practice in the asset market, but it is not easy to practice. First of all, the leading institutions should have a deep understanding of the industry in which they are located. They should view the investment targets from the perspective of the industry and formulate development strategies and capital planning.

Secondly, in practice, we must have strong resource integration capability, integrate and optimize various resources such as customers, investors, channels, technology and so on, which is equivalent to creating new value through recombining. Finally, in the appropriate time window, through the excellent intermediaries, restart the listing plan and other means to maximize the value added and launch smoothly.

In Zhang Weiming's view, "this whole process has high requirements for investors, and only such institutions as high allocating capital can accomplish this arduous task."

In fact, greatness as GE has lost opportunities in such a process. When Welch made a brilliant market value of 20 years after being created by GE, he had been deeply hurt by the overvalued "shareholder value maximization" and market value management. Therefore, after the Welch era, GE hopes to get a breakthrough in the company's business. But what is the consequence?

"GE sold the most profitable GE Capital and changed the GE number. But its workshop or technology is still traditional, and the market capitalization is only about 20% of the original market value, and CEO is continuously changed. Professor Wu Chang Qi, a professor of Guanghua School of Management at Peking University, described the plight of GE transformation case.

Therefore, for the development of enterprises, strategic judgment is very important. On the one hand, enterprises need capital support, but on the one hand, with the needs of economic development, capital is also increasingly needed to get rid of the image of "barbarians", that is, not just arbitrage, but to really help the development of the real economy.

As Zhang Weiming said, "excellent venture capital institutions need to do more than market arbitrage, more to empower enterprises, improve enterprise ecological environment, and ultimately achieve the goal of optimizing regional industrial structure, enterprise structure and capital structure."

Source: China business newspaper Author: Qu Lili

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