Ali is out of the private equity bid: Unisplendour has finalized its reorganization, where is the chip giant heading?

The boots finally landed. On the evening of December 10, Ziguang Co., Ltd. issued the “Announcement on the Progress of Reorganization of Indirect Controlling Shareholders”, stating that “Beijing Zhilu Asset Management Co., Ltd. and Beijing Jianguang Asset Management Co., Ltd. shall be the lead parties. “Lu Jianguang Consortium”) is a strategic investor in the substantive merger and reorganization of seven companies including Ziguang Group.”

In the past period of time, a total of more than 20 domestic institutions participated in the bidding for the restructuring project of Ziguang Group, including government investment platforms, large group enterprises, and well-known investment institutions. Through multiple rounds of selection and bidding, the Zhilu Jianguang Consortium stood out and officially Won the restructuring project of Ziguang Group.

According to public information, Zhilu Jianguang Consortium has more than 30,000 employees, 40% of which are R&D personnel. It has more than a dozen factories and tens of billions of revenue worldwide, and its size is comparable to that of Ziguang Group. It is reported that the performance of companies invested and managed by Zhilu Jianguang has often improved substantially compared to before the acquisition. Stable team and good business performance may be one of the important reasons why it has become a strategic investment of Ziguang Group.

This means that other institutions, including Alibaba, are out. Gu Wenjun, the chief analyst of Xinmou Research, told the 21st Century Business Herald that whether it is horizontally compared with peers, or the difference between before and after the valuation, or inwardly looking at the industrial value of Ziguang, Ziguang has been seriously undervalued and therefore went bankrupt. The reorganization urgently needs to be completed as soon as possible.

At the same time, the listing process of Ziguang Zhanrui, a subsidiary of Ziguang Group, is expected to be further accelerated. The exit of Alibaba is due to multiple factors, including its own business layout, policy supervision, industry trends, and so on.

Why does Ziguang come to this?

From a star enterprise with unlimited halo to bankruptcy and reorganization, the decline of Ziguang Group is staggering.

Public information shows that Ziguang Group was established in 1988. At that time, Tsinghua University established Tsinghua University Science and Technology Development Corporation, which was the predecessor of Ziguang Group. Later, the company was reorganized to form Tsinghua Ziguang (Group) Headquarters, which was renamed Ziguang Group in 2005.

In order to expand its business scope and give play to the linkage effect, Ziguang Group has started a “merger and acquisition journey” since 2013, and successively acquired US-listed integrated circuit chip company Spreadtrum Communications, IoT chip company RDA Microelectronics, and “Xin H3C” 51% control and close to 100% equity of French micro-connector company Linxens.

At the same time, Ziguang Group merged and established Ziguang Zhanrui, established Yangtze River Storage, started construction of Wuhan storage base, and controlled Shanghai Hongmao Microelectronics. In 6 years, Ziguang Group and its subsidiaries have successively initiated M&A offers for more than 20 companies, and invested more than 100 billion yuan.

Similar to companies that have exploded in recent years, Ziguang Group has invested in a large number of projects that have nothing to do with its main business during its expansion, such as equity in financial institutions. In 2018, Ziguang Group invested 2.8 billion yuan in Chengtai Insurance and became its major shareholder. In addition, the excessive demand for funds in the chip manufacturing bases in Chengdu, Nanjing and Wuhan has also dragged down Unisplendour. The demand for funds for project investment will not gradually slow down until 2024-2025.

In 2016, the total investment in the Yangtze River Storage Base built by Ziguang Group after the acquisition of Wuhan Xinxin reached 160 billion yuan. The latest situation is that the Yangtze River Storage is still in the stage of capacity ramping.

A series of mergers and acquisitions and investments have led to a high debt-to-asset ratio of Ziguang Group. The debt maturity is mostly “short-term loans and long-term investments”, and liquidity is severely tight. According to data, as of June 2020, Ziguang Group’s total liabilities reached 202.938 billion yuan, a sharp increase of nearly 44 times from the 4.647 billion yuan at the end of 2012. At the end of 2020, Ziguang Group experienced bond runs and defaults. On July 9, 2021, Ziguang Group was filed with the court by its creditors for reorganization and was accepted by the court.

Industry insiders believe that Ziguang Group’s high leverage has brought huge financial costs, and some operating entities continue to invest heavily. In addition, most of the above-mentioned debts are short-term borrowings, which intensifies external concerns about the debt risks of Ziguang Group.

On July 16 this year, the Beijing No. 1 Intermediate People’s Court ruled to accept relevant creditors’ application for reorganization of the indirect controlling shareholder Ziguang Group, and appointed the liquidation team of Ziguang Group Co., Ltd. as the administrator of Ziguang Group.

At the first bond meeting of Ziguang Group, the declaration situation showed that a total of 1084 creditors declared, with a total declared amount of 186.893 billion yuan, of which 1046 were ordinary debt declarations, accounting for the highest proportion of nearly 70%, totaling 129.382 billion yuan, followed by property ownership There were 43 secured bonds, with 57.306 billion yuan declared. In addition, the tax claims are about 200 million yuan. The final bond review showed that the credit manager reviewed and determined the creditor’s rights of 108.181 billion yuan; deferred the determination of the creditor’s rights of 50.299 billion yuan.

Zhilu Jianguang “Accepted Order in Danger”

In order to solve the debt crisis, Ziguang Group tried several times to save itself by introducing war investment. However, in the end they were forced to terminate due to changes in the internal and external environment. A reporter from the 21st Century Business Herald found on the “National Corporate Bankruptcy and Reorganization Case Information Network” that the strategic investor recruitment announcement issued by the manager of Ziguang Group shows that strategic investors should have total assets of not less than 50 billion yuan and not low net assets. It has the basic requirements of 20 billion yuan, with experience in the management, operation or merger and acquisition integration of the chip industry and the cloud network industry.

The previous seven potential investors were state-owned assets in Guangdong, Beijing, Wuxi, and Shanghai, the state-owned enterprise China Electronics, private equity fund Zhilu Jianguang Consortium, Zhejiang State-owned Assets and Alibaba Group Consortium, and in the end only Zhejiang State-owned and Alibaba Group Alibaba Consortium and Zhilu Jianguang Consortium were shortlisted for the next round of bidding.

Public information shows that Zhilu Capital is a global professional equity investment institution focusing on semiconductor core technology and other emerging high-end technology investment opportunities; Jianguang Assets was established in January 2014 and is a company focusing on the integrated circuit industry and strategic emerging Private equity fund management company for industrial investment mergers and acquisitions.

In an interview with a reporter from 21st Century Business Herald, a chip industry person who did not want to be named said that, on the whole, the industry’s judgment on Ziguang Group is still mainly on integrated circuits, and this business is more difficult to manage. Alibaba’s experience in this area is relatively weak, and it may not be able to manage it well. Therefore, all parties believe that a more experienced chip company is needed to reorganize and take over, which will be more beneficial to Ziguang Group.

After the reorganization is determined, the next step may be to split the business of Ziguang Group, and various sub-businesses such as chip, cloud computing, and integrated circuit will be reorganized.

According to incomplete statistics, since 2015, Zhilu Capital and Jianguang Assets have led many major investments in the tens of billions of semiconductors, accounting for more than half of important M&A projects in related fields such as semiconductors with more than 1 billion yuan, including the largest domestic investment. A semiconductor acquisition, that is, the acquisition of NXP’s NXP Semiconductors for approximately US$2.8 billion. In the end, NXP Semiconductors was taken over by Wingtech, and its performance increased significantly after the integration.

In recent years, Zhilu Capital has been operating frequently. On December 1, Zhilu Capital also spent about 9.3 billion yuan to acquire the world’s largest semiconductor packaging and testing manufacturer ASE’s four packaging plants in mainland China; in November this year, Zhilu Capital announced the acquisition of the world’s top four semiconductor vehicle suppliers ——EPAK, to make up for the shortcomings of domestic vehicles; in July last year, ASM Capital and ASM PACIFIC, the world’s largest back-end packaging equipment supplier, jointly invested 200 million US dollars to establish a joint venture. The joint venture is controlled by ASM Capital. Focus on providing lead frames for memories, analog chips, microcontrollers and automotive chips.

In an interview with 21st Century Business Herald, the chief researcher of China Steel Economic Research Institute, Hu Qimu, said that the participants in the reorganization are basically leading companies in related fields, and they have very strong R&D strength and market influence.

The alliance with Ziguang Group is equivalent to obtaining a very potential asset. If it can be revitalized, it will not only form a good synergy with the existing business, but also use the resources of Ziguang Group to enter a new track more confidently. However, no matter who is to take over, a strategic diagnosis of the diversified expansion of Ziguang Group over the years must be carried out. The strategic direction must be clarified, the key points must be clarified, and the resources must be used on the blade. ?