According to the latest announcement of Evergrande Automobile, the strategic investment of Newton Group has been terminated, and the previously proposed transaction and the amendment of the terms of debt-to-equity swap have not made any further progress.
Evergrande Automobile stated that it will not hold a general meeting of shareholders to approve, nor will it issue any circulars related to (including) special authorizations, Newton Group share subscription agreements, proposed transactions, cleansing waivers, proposed amendments, debt-to-equity swap subscription agreements, offset agreements and debt-to-equity swaps. The company will no longer publish monthly announcements on the progress of the proposed transaction and debt-to-equity swap.
Since the share subscription will no longer proceed, according to the provisions of Rule 26 of the Takeover Code, the subscriber has no obligation to make an unconditional mandatory general offer for all issued shares that it and its concerted parties do not yet own or agree to acquire. The company will not apply to the executive directors for their consent to the special transaction.
In August 2023, Evergrande Automobile signed an agreement with strategic investor Newton Group. The main contents of the Newton Group’s share subscription agreement are that Newton Group will make a strategic investment of approximately US$500 million in Evergrande Automobile and provide RMB 600 million in transition funds; The debt-to-equity swap agreement refers to the fact that creditors such as Evergrande Group and Xu Jiayin offset the 20.895 billion Hong Kong dollar debt owed by Evergrande Automobile by subscribing for new shares of Evergrande Automobile. Assuming that the debt-to-equity swap for new energy vehicles is completed and immediately after the completion of the share subscription for new energy vehicles, China Evergrande’s shareholding ratio in Evergrande Automobile will be diluted to approximately 46.86%, and Evergrande New Energy Automobile will no longer be a non-wholly owned subsidiary of China Evergrande, and its financial results will no longer be included in the consolidated results of China Evergrande.
In October 2023, the transaction was suspended. Evergrande Automobile announced that Newton Group had suspended the performance of relevant obligations under the share subscription agreement. The change in the transaction was directly related to the “Xu Jiayin being forced to take measures” that was exposed at the time. This matter interrupted the progress of the restructuring of Evergrande’s US dollar bonds, which in turn led to Evergrande Automobile’s inability to meet the preconditions of the transaction.
According to Evergrande Automobile previously disclosed, all the funds of this strategic investment will be used for Evergrande Automobile’s Tianjin factory to ensure the normal production of Hengchi 5 [parameters | inquiry] and the gradual mass production of Hengchi 6 and 7. In addition, Newton Group will also assist Evergrande Automobile in developing overseas markets and export 30,000-50,000 Hengchi vehicles to the Middle East every year.
In 2023, Evergrande Automobile’s total revenue was 1.34 billion yuan, of which more than 1.1 billion yuan came from property sales, accounting for more than 90% of the total revenue. Evergrande Automobile lost 11.995 billion yuan last year (a loss of 27.664 billion yuan in 2022). According to statistics, Evergrande Automobile has lost a total of 110.841 billion yuan in the past five years of car manufacturing, with a cumulative delivery volume of 1,389 units.
As of the end of last year, Evergrande Automobile’s total assets were 34.851 billion yuan; total liabilities were 72.543 billion yuan, of which loans were 26.484 billion yuan, trade and other payables were 43.012 billion yuan, and other liabilities were 3.047 billion yuan.
As of the end of last year, the cumulative amount of overdue debts of Evergrande Automobile was about 9.447 billion yuan; as of December 31, 2023, the group’s overdue commercial bills totaled about 3.401 billion yuan. In addition, there are a total of 68 pending lawsuits with an amount in dispute of more than 30 million yuan, and the total amount in dispute is about 13.608 billion yuan.
