Lugang Culture (601599): Textile Cross-Border Film And Television

Just two days after the announcement of "breaking up" with Huaibei Construction Investment Group on July 1, Jiangsu listed company Lugang Culture Co., Ltd. joined Zhejiang wentou. The company announced on the evening of July 3 that Qian Wenlong and Miao Jinyi, shareholders of the company, were negotiating with Zhejiang Cultural Industry Investment Group on the transfer of control shares and other related matters, involving the change of control right of the company. This is the third time in more than a year that Qian Wenlong and others are planning to sell their shells.

Before Huaibei capital company's share holding plan, Huaibei new holding company will obtain 10.47% of its shares, which is worth noting. If Zhejiang culture is invested in Lugang culture, will Huaibei state-owned assets be willing to be green leaves?

This time, Zhejiang Cultural Investment Co., Ltd

Located in Tangqiao town, Zhangjiagang City, Lugang culture, formerly known as Lugang technology, was listed on the Shanghai Stock Exchange in 2011. The main textile industry was worsted yarn. Since 2014, the company has made cross-border transformation and entered the film and television industry in a large scale. It has successively acquired century long and Tianyi film and television, and established a subsidiary company Lugang Internet, which eventually formed a dual industry pattern of textile and film. The company also changed its name to Lugang culture in 2016.

In 2012 and 2013, the company made losses for two consecutive years after deducting non performance. Cross border film and television once brought great changes to the company's performance. From 2014 to 2017, the company's net profit increased from 59.4 million yuan to 293 million yuan. The company's participation in the "Red Sea Action", "Tomb theft notes", "the return of the great sage" and other film and television drama market performance is good.

But since 2018, with the arrival of the winter of film and television, the original profit cows have become a burden. In 2018, the company's performance dropped 80% and the net profit was only 56.09 million yuan. Among them, century long, a film and television subsidiary, lost 92.992 million yuan and accrued goodwill impairment of 80.1547 million yuan, which became the main reason for the sharp decline in performance. In 2019, the company has a huge loss of 966 million yuan, including a total loss of 660 million yuan from three subsidiaries of the film and television sector, and has made a provision for asset impairment of 550 million yuan.

At the end of January last year, Qian Wenlong, the founder of the company, and other major shareholders proposed to transfer 5.1% of the shares of the listed company to Lijing integrated company controlled by the government of the old urban area of Luoyang city with 280 million yuan, and entrust the latter with 14% of the voting rights. If the deal is concluded, the company will change its ownership of Luoyang state-owned assets. However, in July of that year, the transaction was finally terminated due to the lack of approval documents from the State-owned Assets Supervision Department of Henan Province.

More than a month later, on August 27, Lugang culture reached a cooperation framework agreement with the Management Committee of Anhui Huaibei Economic Development Zone to jointly build the "Lushang town" project. On November 22, the company announced that Qian Wenlong, the actual controller, and Miao Jinyi, the main shareholder, signed a framework agreement with Huaibei construction investment, intending to transfer 5.1% of the listed company's shares to Huaibei construction investment and entrust 15.43% of the voting rights to the latter. If the transaction is completed, Huaibei SASAC will become the actual controller of the listed company. However, the transaction was delayed and the formal transfer agreement was not signed, and it was finally terminated on July 1 this year.

Just two days later, Qian Wenlong and others quickly found a new bidder Zhejiang wentou. According to Tianyan survey, the four shareholders of Zhejiang wentou are Zhejiang provincial finance department, Zhejiang publishing united group, Zhejiang Radio and television group and Zhejiang newspaper media group, accounting for 50%, 20%, 20% and 10% respectively. According to the official website, Zhejiang cultural industry investment group, established on December 11, 2018, with a registered capital of 3 billion yuan, is an important investment subject and main investment and financing platform for the development of cultural industry in Zhejiang Province, shouldering the heavy task of building "cultural Zhejiang" at a high level and boosting the development of trillion level cultural industry. The company focuses on culture and finance, film and television culture, culture and tourism integration, cultural creativity, culture and technology, and has established the Yangtze River Delta digital culture fund and Zhijiang culture and tourism industry fund.

How to deal with the state owned assets of Huaibei?

No matter from which point of view, Zhejiang wentou can be called "high, rich and handsome". But now the embarrassment is "ex boyfriend" Huaibei state-owned assets.

In fact, while the equity transfer can not be promoted, Lukang culture has also made second-hand preparation. On April 14, this year, the company announced the plan of private offering and announced the introduction of two strategic investors, Huaibei Central Lake Zone and Anhui new materials fund. They will subscribe for 120 million shares and 93.67 million shares newly issued by the company with 280 million yuan and 219 million yuan respectively, accounting for 10.85% and 8.47% of the shares respectively after the issuance, becoming the largest shareholder and the third largest shareholder.

Since the control right transfer agreement with Huaibei construction investment was not formally reached, the fixed increase and shell sale were carried out separately. After the issuance, Qianlong will become the second largest shareholder. However, Miao Jinyi, the sixth largest shareholder of the company, entrusted the voting rights to Qian Wenlong at the same time, so he will still maintain the status of the actual controller with a total of 15.04% of the voting rights.

However, as Qian Wenlong and others turn to sell their shells to Zhejiang wentou, the equity structure is quite delicate. Huaibei central lake zone is a wholly-owned subsidiary of Huaibei construction investment. Anhui new materials fund is operated independently by Anhui longhuahui, the fund manager and executive partner. The two are not acting in concert. However, among the investors of Anhui new materials fund, there are not only Huaibei construction investment's enterprises, but also Huaibei industry support fund, Anhui province's three industries and one innovation industry development fund, Anhui Chaohu Economic Development Zone Chengxin construction investment, Hefei Dongcheng Industrial Investment and other state-owned assets. Other investors are also Anhui Enterprises. If there is no need for Huaibei people to form an unexpected fund one day.

On the other hand, if we follow the previous two shell sales model, Qian Wenlong and others' equity transfer plus voting rights entrustment, Zhejiang wentou may eventually obtain about 20% of the voting rights, and Huaibei construction investment and new materials fund jointly control 19.32% of the voting rights. So whose Lugang culture will be in the future?