Cross-shareholding usually means that the parent company and subsidiaries hold absolute or relative control rights with each other, so that the parent company and subsidiaries can control each other's operations. The reason for this is that when the parent company increases capital and shares, the subsidiary company obtains the new shares of the parent company.
Cross-shareholding is easy to produce improper related party transactions (controlling shareholders and actual controllers), which damages the company's interests and is not conducive to maintaining the independent legal person qualification of subsidiaries (it is difficult to form the actual controlling shareholders due to vague enterprise property rights, and the company's management personnel replace the company owners to become the owners of the company, thus forming insider control), which is not conducive to safeguarding the interests of minority shareholders (in related companies, the interests of minority shareholders may be damaged by the will of large shareholders or holding groups, and in the distribution of business opportunities and profits, therefore, according to the law, When investing abroad, it must be voted by the relevant institutions (three associations), and the investment quota also has the right to limit. Therefore, we should strengthen the supervision and control of the business decisions of affiliated companies, protect voting rights and increase prudence.
There are three ways of equity swap in practice, namely, equity swap, equity swap+cash or assets.
(A) the legal risks of equity swap
This means that the replacement can be completed without paying any cash, thus effectively reducing financial risks. It usually happens between enterprises with complementary advantages.
For example, on July 28th, the equity swap case, which had been brewing for half a year, was finally settled. Lenovo (0992, HK) priced the main part of its IT business at RMB 300 million, replacing AsiaInfo Technology (namely AsiaInfo Holdings Limited Nasdaq: Asia) 15% equity, thus completing the business cooperation between the two companies in the field of IT services.
According to Lenovo's last financial report, the turnover of its IT service department is 300 million yuan, which is basically parity. According to Lenovo's accumulated investment of 654.38 billion yuan in IT service department over the years, Lenovo's investment income is equivalent to 200%. At present, AsiaInfo's stock is at the lowest point in history, and only 300 million yuan of assets have been exchanged for the status of the single largest shareholder, which is ten times higher than that of AsiaInfo in 2000. Since the equity swap does not involve cash transactions, it also reduces the financial pressure of AsiaInfo.
(B) the legal risk of equity plus asset replacement
We first study a typical case to illustrate the characteristics of this M&A model.
Case: Qilu Software Reorganizes Taishan Tourism.
Qilu Software is a holding subsidiary of Inspur Group. Inspur is a high-tech software development enterprise established by integrating internal software resources to set up office automation research institute and system integration division, and merging and integrating external social forces to set up communication division and finance division. Qilu Software, as the software flagship of Inspur, is also the backbone enterprise of Qilu Software Park, one of the first four national software industrial parks in China. The company's basic positioning is defined as "a large-scale application software development and system integrator for communication, finance, government and other industries", and it interacts with the development of other IT industries in Inspur. The company has more than 30 kinds of independent copyright application software suitable for communication, finance, administrative organs and other industries.
Taishan Tourism is the first listed company recommended by the National Tourism Administration and the first listed tourism enterprise in Shandong Province. It is a pillar enterprise of Shandong tourism industry and Taian economy, with good asset quality and strong profitability. It is a rare high-quality shell resource.
Qilu Software's acquisition of "Taishan Tourism" is divided into two steps: first, Qilu Software signed an agreement with Tai 'an SASAC to transfer some state-owned shares, thus making Qilu Software the largest shareholder of "Taishan Tourism"; The second is asset reorganization, that is, the high-quality software assets of Qilu Software (communication department and system integration department) are converted into Taishan tourism. After completion, Qilu Software owns the ownership of three ropeways of Taishan Tourism, and the main assets and business of Taishan Tourism are software development and production.
Strong technical support and market pull have enabled Qilu Software to enter the fast lane of rapid development. After all the acquisition activities are completed, Taishan Tourism (600756) listed in Shanghai will be renamed Qilu Software and successfully listed on the backdoor. Qilu Software will bring continuous investment value to shareholders.
As can be seen from the above cases, this means that the original shareholders of the company can obtain the high-quality assets of other companies or shareholders at a certain cost by transferring part of their shares or issuing new shares. The advantage is that they can get high-quality assets and expand the scale of their enterprises without paying cash. This method is usually used when one party has high-quality assets, which can quickly increase the production capacity and scale of one party, risk not paying cash and reduce financial risks.
(C) legal risks of equity plus cash replacement
This means that in addition to mutual replacement of equity, a certain amount of cash must be paid to complete the replacement. For example, Gome obtained the controlling stake of Yongle as it wished in this way. This usually happens when the transfer price of M&A is very high and the controlling position is usually obtained after the replacement.
Therefore, the way of equity swap is still relatively flexible, and the result of the swap is mutual holding of equity, which needs to be taken in a specific way according to the actual situation.
I hope I am satisfied!