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Reading group 9 months market value evaporated 48 billion 600 million Tencent relatives close marriage cut leek?

via:博客园     time:2018/8/24 18:34:08     readed:382

Editors of China Economic Net: On the evening of August 13, Yuewen Group (00772.HK) announced a total of 15.5 billion yuan "whale swallow" & quot; Xinli Media. However, investors did not buy, starting on August 14th, the reading group's share price fell for 5 days. Among them, on August 17, the share price of the reading group fell to HK$48.50. Compared with the highest price of HK$110.00 set on the first day of listing, the market value of the reading group has evaporated by HK$55.744 billion over the past 9 months, equivalent to RMB 48.553 billion.

The Reading Group was established in 2013 and its predecessor was Tencent Literature. In 2015, after Tencent Literature acquired Shanda Literature, it established a new company reading group to manage and operate Shanda Literature and Tencent Literature's starting point Chinese website, Chuangshi Chinese website, novel reading network, Xiaoxiang Academy and other network brands.

On November 8, 2017, the Reading Group was listed on the Hong Kong Stock Exchange with an issue price of HK$55. The first day of trading was up 86.18%, and the stock price was HK$102.4. The turnover was HK$14.171 billion. However, afterwards, the share price of the reading group fell all the way.

Founded in 2007, Sunray Media is dedicated to the production of TV dramas, movies, online drama productions, global program distribution, entertainment marketing and artist brokerage. The Reading Group announced that it intends to acquire a 100% stake in Xinli Media through a combination of cash and new shares at a price of no more than RMB 15.5 billion.

Tencent, the major shareholder of the Reading Group and the second largest shareholder of Xinli Media, acted as a seller in this transaction. Among the total consideration of RMB 15.5 billion, the consideration paid by Reading Group to Tencent is RMB 5.29 billion, and the settlement method is shares. The management share price of Xinli Media's management is RMB 10.21 billion, which is settled with 50% cash and 50% shares. After the transaction is completed, Tencent’s shareholding in the Reading Group will further increase to 54.34%.

Since 2012, Xinli Media has submitted IPO application materials to the Securities and Futures Commission three times, but this listing has ended in failure five years later. Xinli Media & ldquo;Selling & rdquo; Reading Group, can be described as a double-edged: can be listed on the curve, but also ease the pressure on funds.

Whether Xinli Media is worth 15.5 billion is the focus of doubt in the market.

According to media analysis, according to the announcement issued by Xinli Media, the company's operating income in 2015-2017 was 656 million yuan, 745 million yuan and 1.67 billion yuan respectively, and net profit was 116 million yuan and 156 million yuan respectively. And 349 million yuan. Although Xinli Media's performance is on a growing trend, compared with Huayi Brothers, Huace Films and Ciwen Media's net profit of 830 million yuan, 630 million yuan and 408 million yuan respectively in 2017, Xinli Media appears to be more Weak. However, at the valuation level, Xinli Media is quite similar to these three companies and even has a go-ahead. According to data from August 21, the total market capitalization of Huayi Brothers, Huace Film and Ciwen Media was 15.87 billion yuan, 16.254 billion yuan and 5.87 billion yuan respectively.

It is worth noting that according to the announcement, Xinli Media still has a high asset-liability ratio, of which the asset-liability ratios in 2015-2017 reached 52.31%, 61.13% and 70% respectively, while the cash flow generated from operating activities in 2017 was net. The amount is also -3.1 billion yuan. In this regard, Xu Pan believes that from the current business performance of Xinli Media, and compared with other film and television listed companies, Xinli Media's valuation of 15.5 billion yuan is not a decimal.

In fact, the reading group also stayed "after the hand". As a bet, Xinli Media promised a net profit of not less than RMB 500 million, RMB 700 million and RMB 900 million in 2018-2020. If the bet fails, the consideration paid by the reading group to the seller will be deducted accordingly. The analysis pointed out that such gambling conditions are not too stressful for Xinli Media. According to the financial data disclosed in the acquisition announcement, Xinli Media's net profit after tax in 2017 was 376 million yuan, and the net profit after tax in 2016 was 161 million yuan. As of the end of 2017, Xinli Media's unaudited total assets and net assets were 4.118 billion yuan and 1.299 billion yuan respectively. With such income and profitability, we want to achieve a net profit of 2.1 billion in the next three years. Xinli Media has a long way to go.

According to the analysis of the International Finance News, in less than half a year, Xinli Media's valuation increased by 3.5 billion yuan, an increase of 29.17%, while Linzhi Tencent earned nearly 2 billion yuan on the books, which can be said to be an excellent sale. . However, the pick-up is the same as the reading group under Tencent. Some netizens joked and said: The difference between the son (Linzhi Tencent) and the son who is holding it by hand (Reading Group) is the difference?

The listed stock price of the reading group is falling, falling below the issue price

Read Group was formerly known as Tencent Literature and was incorporated in the Cayman Islands in April 2013. In 2014, Tencent Literature acquired Shanda Literature for US$730 million, and the two merged into the Reading Group. The reading group mainly realizes income generation through a large amount of original literary content generated on the platform. Online reading, copyright operation, and IP adaptation are important business scopes.

On November 8, 2017, the reading group of the Hong Kong Stock Exchange officially listed, the issue price of 55 Hong Kong dollars, the opening price of 90 Hong Kong dollars, the opening price rose to 110 Hong Kong dollars / share in an hour or so, and finally closed at 102.4 Hong Kong dollars / share, the first day of listing The increase was 86.18%, the price-earnings ratio was 325.2 times, and the total market value was 92.8 billion Hong Kong dollars (equivalent to 78.88 billion yuan).

On October 23, 2017, the Reading Group officially launched its global roadshow for Hong Kong's initial public offering, with a total of 151 million shares issued at a high price of HK$55 per share in the pricing range, with a total market capitalization of US$6.4 billion. The reading group raised a total of US$1.07 billion (excluding over-allotment option). The amount of financing will be used to expand the online reading business and sales and marketing activities of the reading group, and to increase participation in the development of derivative entertainment products adapted from the company's online literature, and will also be used to help the company's potential investment, acquisition, strategic alliance. And general working capital.

Shen Meng, executive director of Shannon Capital, pointed out: “When reading the article, it is the prestige of Tencent, but it still needs to work hard on its own performance. If you can't get excellent results before the market heats up, the pressure on the stock price may be great. ”

Some fund managers and Hong Kong stock researchers believe that although the current revenue and profits of reading are growing, but the current performance is not enough to support the market value of nearly 100 billion, or even enough to support the market value of 50 billion yuan. .

After the listing of the Group, the stock price went down. On August 17 this year, the reading group's share price fell to HK$48.5 in intraday trading, falling below the issue price.

From the highest price of 110 Hong Kong dollars to the lowest price of 48.5 Hong Kong dollars, the market value of the reading group has evaporated by 55.744 billion Hong Kong dollars, equivalent to RMB 48.553 billion.

Xinli Media has a net profit of 2.1 billion in three years. After the acquisition, Tencent’s shareholding in Reading Group is 54.34%.

According to Titanium Media, according to the announcement, the acquisition will be settled in a combination of cash and new shares. Among them, the consideration paid by Wenwen Group to Tencent was 5.29 billion yuan, and the settlement method was shares. After the transaction, Tencent's shareholding ratio to Wenwen Group rose to 54.34%.

According to the final agreement reached between the two parties, the existing management team of Xinli Media will continue to be responsible for TV drama, internet drama and film production business, and have the right to select original content, including selecting materials from platforms other than reading texts. At the same time, Xinli Media will contact its content library, writer platform and editorial team with the help of reading texts.

In fact, Tencent has already made aspirations for Xinli Media. In March of this year, Tencent purchased 27.64% of Xinli Media for 3.317 billion yuan, replacing its media share with 31.72% of its shareholding. At that time, Xinli Media's valuation was 12 billion yuan. Tencent's Incoming also means that the third IPO will be broken again.

After receiving the equity of Light Media, Tencent acquired a 12.36% stake in Xinli Media in addition to its core shareholders and management in just a few months. This part of the equity includes a large number of stars, directors and Wanda investment. Tencent’s shareholding in Xinli Media reached 44.08%, and successfully surpassed founder Cao Huayi as the largest shareholder.

However, the valuation of 15.5 billion is also subject to certain conditions. According to the announcement, the reading group will pay a cash consideration of 5 billion yuan in three years. As a bet, Xinli Media promises a net profit of not less than RMB 500 million, RMB 700 million and RMB 900 million for the three consecutive years from 2018 to 2020. If the bet fails, the consideration paid by the reading group to the seller will be deducted accordingly.

Such gambling conditions are not a big stress for Xinli Media. According to the financial data disclosed in the acquisition announcement, Xinli Media's net profit after tax in 2017 was 376 million yuan, and the net profit after tax in 2016 was 161 million yuan. As of the end of 2017, Xinli Media's unaudited total assets and net assets were 4.118 billion yuan and 1.299 billion yuan respectively.

With such income and profitability, we want to achieve a net profit of 2.1 billion in the next three years. Xinli Media has a long way to go.

Xinli Media's low profitability and high commitment

According to the investor report, as a bet, Xinli Media promised a net profit of not less than 500 million yuan, 700 million yuan and 900 million yuan in the next three years. According to Xinli Media's previous IPO data, its operating income in 2014~2016 was 745 million yuan, 565 million yuan and 655 million yuan respectively; after deducting non-recurring gains and losses, the net profit attributable to shareholders of the parent company was 129 million yuan. 8657.34 million yuan and 90.755 million yuan; in addition to net profit and unstable growth of revenue, a large part of the company's net profit comes from government subsidies, including special funds for film and television cultural industry development, film and television drama awards, etc., and the asset-liability ratio has also increased. Up to 70%.

At the same time, in three IPO applications, Xinli Media has received feedback from the supervisor twice. The most recent one was in the early 2018, in addition to the equity change, related party transactions, and shareholders' light media. It also added feedback on a total of 41 questions about the company's net profit, issuance, and revenue. The degree of cautiousness in regulation can be seen.

However, the new media has dared to succumb to such high performance, the industry believes that the sufficiency or the support of Tencent. It is understood that while winning the new media, the reading group also signed a licensing agreement with Tencent to grant Tencent to the future rights and rights of the film and television information network. For this reason, Tencent has to pay a maximum of RMB 1.4 billion, RMB 2.1 billion and RMB 2.3 billion in 2018~2020, and a total of RMB 5.8 billion in three years. This also means Tencent has locked in exclusive online copyrights from all of Xinli Media in the next three years.

In addition, the cooperation between the two parties also includes Tencent's IP licensing and other readings (Xinli Media) to provide Tencent's film and television productions to Wenwen (Xinli Media). To this end, the Reading Group will pay an annual IP license fee of 50 million yuan to Tencent in the next three years. Tencent will pay the reading group no more than 100 million yuan and 150 million yuan in film production costs in 2019 and 2020 respectively. The reading group told reporters that according to the final agreement between the two parties, the existing management team of Xinli Media will continue to be responsible for TV drama, internet drama and film production business, and have the right to select original content, including from platforms other than reading. material. With the help of reading the text, Xinli Media will be exposed to the Group's content library, writer platform and editorial team.

According to Xu Xiang, a senior cultural investor and general manager of the Southwest Region of Shenzhen Venture Capital, film companies that are not listed will become good targets for mergers and acquisitions. “Domestic film and television overcapacity, too many film and television investment companies, can do less industry chain, an average of over 10,000 episodes of TV dramas, hundreds of film productions, rare products, most do not make money, is extremely social resources Big waste. ”

Xu Xiang said that Tencent occupies a very good traffic entrance and has not paid much attention to it. It is a good thing for film and television companies to be acquired by BAT big Internet platform, at least not bad, “The listed companies are moving forward, not listed, performance A good film and television company will become the target of mergers and acquisitions. With the TV series being replaced by the Internet drama, the combination of the film and television company and the Internet is a better way out. ”

In Xu Xiang's view, the TV drama head enterprise switched to online drama, plus Tencent's platform and traffic, the story is still very valuable, "Now most of the online dramas are generally of low quality and lack professional and experienced people. Integration works well, creating enormous value and wealth on the Internet. But how to tell the story of the investment, it depends on the reading and the new after the run-in. ”

The financial dilemma makes Xinli forced to “sell” "

According to Chinese entrepreneurs, the deal between Tencent and Xinli Media was reached. In addition to Tencent's initiative, it also stems from the fact that Xinli is in a financial deadlock.

According to Xinli's 2017 prospectus, as of the end of 2016, Xinli Media had only 278 million yuan in funds. However, Xinli’s next film and television drama creation list includes “Amateur Agent”, “Search Design”, “One Kiss, Love”, “Zhu Xian”, etc. The TV drama development projects include “Ying Yu Nian” and “Yu Sin” There are more than ten works in four departments. According to Xinli's prospectus, these projects need to invest more than 2.5 billion yuan.

This is obviously a situation that can't make ends meet. In addition, Xinli Media's asset-liability ratio has reached 70% and is increasing year by year. In 2016 and 2015, Xinli's debt ratio was 61.13% and 52.31%.

In addition, the "Rugao Biography" produced by Xinli Duan was delayed to broadcast, which made Xinli's financial situation even worse. The production cost of "Rugao Biography" has been reported to have exceeded 300 million yuan, and the sowing date has been indefinitely postponed, making it difficult for Xinli to recover the cost.

The entry of Tencent will allow Xinli Media to completely solve the funding problem. Moreover, the regulatory trend has become more stringent for film and television companies' IPOs, and Xinli Media's IPO goals have gradually drifted away.

In the prospectus, Xinli Media also has two major problems with the company: insufficient financial strength and insufficient brand awareness: “Although the company has a certain advantage in the industry with its rich operational experience and production capabilities, The limited financial strength still limits the company's production capacity and is relatively disadvantageous in the competition. ”

These problems can be solved by Tencent's blessing. In March, after Light Media and Tencent reached an agreement on the equity transfer of Xinli Media, Cao Huayi, chairman of Xinli Media, made it clear that it would abandon the IPO.

In the past 5 years, Xinli Media’s valuation has achieved a triple jump.

According to Wuyi Finance, in October 2013, Light Media received a 27.64% stake from the original CEO of Xinli Media, Wang Ziwen, for 829 million yuan. Xinli Media's valuation is 3 billion yuan. In March of this year, all the shares on the light handle were sold to Tencent for 3.317 billion yuan, which became the second largest shareholder of Xinli Media. At that time, Xinli's valuation rose four times to reach 12 billion. In less than half a year, Xinli Media has once again become the target, with valuations increasing by nearly 30% from March to 15.5 billion. The 15.5 billion basic media stocks with the highest market capitalization are of the same order of magnitude. At present, the market value of light media is about 27 billion, Huace is 16.5 billion, and Huayi is 16.2 billion.

In this calculation, Xinli Media's P/E ratio has exceeded 40 times. Therefore, some insiders said that the valuation of Xinli Media has been intentionally raised.

The consideration shares in the acquisition were issued at a consideration of HK$80 per share. However, in fact, on the last trading day prior to the announcement of the acquisition, the closing price of the reading group was HK$67/share, and the premium of the new issue price of HK$80 was close to 20%; if the average of 30 consecutive trading days before the announcement was announced, the average price was HK$70.37/ The stock price of the stock is also a premium of about 14%.

This is in complete contrast to most of the mergers and acquisitions. Some media industry analysts who do not want to be named said that the case of such premium mergers and acquisitions is relatively rare, and some cases will be converted according to the company's share price.

Some investors in the investment banking department of the securities company said that because Tencent is the controlling shareholder of the M&A company and the second largest shareholder of the M&A target, the increase in the share price and the valuation of the M&A target is not significant. “But outsiders seem to have raised their stock prices. ”

At the same time, the merger case also showed caution in reading the text. About 70% of the transaction considerations are paid by shares, in addition to the gambling performance, share and cash installment payments (the lock-up period of the shares, the ban in 2020, and the ban only 20% per year thereafter), which maximizes the acquisition risk control.

Xinli Media’s valuation of 15.5 billion is questioned

According to the Beijing Business Daily, the troubles of Ruru Biography have not been completed, and Fang Xinli Media, the producer of the work, has been overwhelmed, especially after the reading group announced a 15.5 billion yuan acquisition of 100% equity of Xinli Media. As of the second day after the announcement, the reading group's share price continued to fall. The data shows that the reading group only evaporated the market value of 10 billion Hong Kong dollars in one day on August 14, and the market value of the reading group evaporated nearly 20 billion Hong Kong dollars in the four trading days since August 14. Brokerage analyst Xu Pan pointed out that the plunging situation of the Reading Group was not only affected by the market environment, but also related to the high valuation of Xinli Media.

According to public information, when Light Media transferred its 27.64% stake in Xinli Media to Tencent in March this year, Xinli Media's valuation was 12 billion yuan, but in the past 5 months, Xinli Media's valuation was An increase of 3.5 billion yuan. Perhaps from this figure alone, it cannot be seen why some practitioners believe that Xinli Media is overvalued, but if you carefully observe the operation of Xinli Media and compare it with other film companies, you can find out s reason.

According to the announcement issued by Xinli Media, the company's operating income was 656 million yuan, 745 million yuan and 1.67 billion yuan in 2015-2017, and net profit was 116 million yuan, 156 million yuan and 349 million yuan respectively. . Although Xinli Media's performance is on a growing trend, compared with Huayi Brothers, Huace Films and Ciwen Media's net profit of 830 million yuan, 630 million yuan and 408 million yuan respectively in 2017, Xinli Media appears to be more Weak. However, at the valuation level, Xinli Media is quite similar to these three companies and even has a go-ahead. According to data from August 21, the total market capitalization of Huayi Brothers, Huace Film and Ciwen Media was 15.87 billion yuan, 16.254 billion yuan and 5.87 billion yuan respectively.

It is worth noting that according to the announcement, Xinli Media still has a high asset-liability ratio, of which the asset-liability ratios in 2015-2017 reached 52.31%, 61.13% and 70% respectively, while the cash flow generated from operating activities in 2017 was net. The amount is also -3.1 billion yuan. In this regard, Xu Pan believes that from the current business performance of Xinli Media, and compared with other film and television listed companies, Xinli Media's valuation of 15.5 billion yuan is not a decimal.

Who earned?

According to the International Finance News, in this transaction, in addition to the reading group, Xinli Media, the high valuation is indispensable for the following major factors.

In March 2018, Light Media sold 27.642% of the shares held by Xinli Media to Linzhi Tencent (a wholly-owned subsidiary of Tencent Industrial Investment Fund) at a price of 3.317 billion yuan. At that time, it was widely expected that Xinli Media would make up for Tencent. The film and television production short board, Xinli Media's valuation is 12 billion yuan.

This time, in the total consideration of 15.5 billion, Reading Group will pay a consideration of RMB 5.29 billion to Tencent, which is its own shareholder, and the settlement method will be shares; Reading Group will pay Cao Huayi, the founder of Xinli Media, and the original management of the company. 10.1 billion yuan, settled by 50% cash and 50% shares. After the completion of the transaction, Tencent held the shares of the Reading Group to 52.66%, which is the controlling shareholder; Tencent also holds 44.08% of the shares of Xinli Media, which is the largest shareholder of Xinli Media.

In less than half a year, Xinli Media's valuation increased by 3.5 billion yuan, an increase of 29.17%, while Linzhi Tencent earned nearly 2 billion yuan on the books, which can be said to be an excellent sale. However, the pick-up is the same as the reading group under Tencent. Some netizens joked and said: The difference between the son (Linzhi Tencent) and the son who is holding it by hand (Reading Group) is the difference?

Some insiders said that in terms of profitability, Xinli Media can't match this valuation, but Xinli Media's production ability and reputation are also very valuable. In addition, Xinli Media has a large number of star shareholders, including Chen Kaige, Huang Yi (actor Hai Qing), Li Guangjie, Yu Zheng (producer Yu Zheng), Zhang Xiaotong (Zhang Jia translation), Hu Jun, Song Jia, etc. If the bid is too low, Possible acquisitions are difficult to complete.

It is foreseeable that if the acquisition of the Reading Group is completed, the shareholders of Xinli Media, which had initiated three IPOs in 2012, 2014 and 2017, will eventually benefit.

According to the announcement, at the completion of the transaction, Xinli Media Management can only get 40%, that is, 1.5 billion yuan in cash and 2.6 billion yuan in stock, and the stock adopts a stock price of 80 Hong Kong dollars per share, which is much higher than the reading group now. share price. In addition, Xinli is committed to achieving annual profit of RMB 500 million, RMB 700 million and RMB 900 million from 2018 to 2020. If the performance benchmark level is not completed, the subsequent payment consideration will be adjusted.

The market value of reading texts evaporated by 9 billion yuan in a single day.

According to the Securities Daily, on the evening of August 13, the reading group disclosed the acquisition plan, saying that the company intends to acquire 100% of Xinli Media at a price of no more than 15.5 billion yuan. Since 2014, Xinli Media has failed to attack IPO twice. In March of this year, Light Media transferred its 27.64% stake in Xinli Media to Tencent.

However, the market does not seem to buy it. On August 14th, the reading group's share price went down. As of the close, the share price fell 17.01%, and the share price fell by 11.4 Hong Kong dollars. The total market value shrank by 103.28 Hong Kong dollars (about 9.05 billion yuan).

A brokerage analyst who did not want to be named said that the reason why the share price of the reading group fell sharply was that the purchase price was higher than expected.

On August 13, the reading group also disclosed the unaudited interim results in 2018: in the first half of the year, the company realized revenue of 2.283 billion yuan, an increase of 18.6%; realized operating profit of 567 million yuan, an increase of 142.2%; realized profit of 5.04 100 million yuan, an increase of 136.2%. The main source of income is online reading. The company said that through the acquisition of Xinli Media, the Group's industrial chain layout can be opened up. The company's rich online literature IP will provide strong content support for Xinli Media.

However, on August 14, some institutions also lowered the target price of the Reading Group. Among them, BOCOM International published a report analysis, according to the 10-year discounted cash flow of the Reading Group, lowered the target price by 6.7%, from 75 yuan to 70 yuan, and the rating maintained “Neutral”.

The bank believes that the company's monthly paying subscribers are lower than expected in the first half of 2018, and converting new subscribers into paying subscribers also requires one quarter to three quarters, while lowering its 2018 and 2019 earnings due to higher content costs. Forecast is 19%. However, in the long run, the company may benefit from its IP operations, even though the current revenue share of related businesses is still small.

"If rumors" will "cool" & rdquo;?

According to the time and finance, as the first big gift after the "Learning Marriage" group, "Rugao Biography" can be called Xinli Media "Ding Ding's work". This palace drama, which was born with a gold spoon, was positioned as a companion piece of "Biography" from the beginning of the filming. Not only the original class director, screenwriter sitting in the town, but also "after the film", Zhou Xun, popular movie star Huo Jianhua and Zhang Fengyi, Wang Jinsong, Li Guangjie, Yan Junmei and other old play bones blessing. Compared with the Yu Zheng production team that has been questioned by the "Zhejiang Raiders", "Rugao Biography" is called "Golden Branches and Leaves".

The embarrassing thing is that the road after the "Biography of the rumor" has gone quite twists and turns. The first plagiarism is plagiarism. The original author Wu Xueyu (pen name Liu Wei), after writing "The Biography", allegedly spent five years concentrating on creating "Rugao Biography". However, I did not expect that after the book was published, it was accused by the online writer & quoquo; 匪我思存”, saying that he copied his novel. Whether or not plagiarism is still inconclusive.

Subsequently, CCTV also exposed the news that the two starring performances of "Rugao Biography" reached 150 million yuan, which triggered public debate. According to the prospectus published by Xinli Media, Zhou Xun and Huo Jianhua's remuneration were 53.5 million yuan and 50.72 million yuan respectively. Although they did not meet the report's "1.5 billion yuan", they still shocked the outside world.

The most puzzling thing is that "Rugao Biography" was originally scheduled to log in to Oriental TV and Jiangsu Satellite TV in December 2017, but after several times, it was "sent to the crisis" and had to be postponed. After experiencing one round after another, the "Deferred Raiders" finally seized the opportunity and became the most popular costume drama in the moment.

The good news is that on August 21, the share price of the reading group saw a retaliatory rebound. After opening at HK$49.7, the company's share price went all the way up to close at HK$54, up 9.09% on the day. “Don't fall into a new media” is obviously too emotional. After the capital market has begun to correct the valuation, “The King of the Opera” can “sing a singer” and regain the lost mountains?

Assets under IP integration

According to Time Weekly, in the latest transaction, Tencent’s role as a seller, if it is based on the difference between the two transactions, Tencent is equivalent to indirectly obtaining nearly 2 billion yuan of investment income. According to the agreement, the transaction is carried out with 75% of the shares + 25% of the cash. In the total consideration of RMB 15.5 billion, the consideration paid by Reading Group to Tencent is RMB 5.29 billion, and the settlement method is shares; Xinli Media’s management sells shares at a price of RMB 10.1 billion, 50% cash and 50% shares. Settlement.

After the completion of the transaction, Tencent's shareholding in the Reading Group will further increase to 54.34%, while the Reading Group will wholly own Xinli Media. The Reading Group said that in the new Chinese culture, after the acquisition of Xinli, the content resources of the company will receive faster and higher value conversion, and the two parties will jointly promote the sound development of the network literature IP ecosystem.

However, Shen Meng, executive director of Shannon Capital, pointed out that given Tencent’s distinctive role in the reading group and Xinli Media, the transaction, although compliant, is prone to controversy.

Among them, for the high external valuation dispute, the reading group explained that according to the final agreement reached between the two parties, the reading will use RMB 5.1 billion in cash and RMB 10.4 billion in stock to acquire Xinli from Xinli management team members and Tencent. 100% of the shares, including a profit-based compensation mechanism based on financial performance to motivate the new management team and align it with the company's long-term development.

The reading group said that the stocks used for stock consideration will be issued at a price of HK$80 per share. The Xinli management team will receive about 40% of the relevant agreed considerations when the transaction is completed (RMB 1.5 billion). Cash and RMB 2.6 billion in stock), the remaining consideration will be deferred and depends on future financial performance.

The consideration of HK$80 per share, if it is based on the stock price of HK$67 per share on the day of the announcement of the M&A announcement, means that the purchase price premium exceeds 20%. Based on the closing price of HK$55 on August 14, the acquisition price has a premium of over 40%.

As for Tencent's “New Culture”, how will the content platforms of both parties be integrated? According to the reading group, the existing management team of Xinli Media will continue to be responsible for TV dramas, online dramas and film production business, and has the right to select original content, including selecting materials from platforms other than reading texts. At the same time, Xinli Media will contact the reading library's content library, writer platform and editorial team with the help of the reading group. This also shows that in the future, the two sides will not make large-scale adjustments in content, technology and personnel.

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