When many enterprises “cut their heads” to seek listing, Weiqiao Textile (2698.HK), a large private enterprise of Shandong Weiqiao Venture Group Co., LTD. (hereinafter referred to as “Weiqiao Group”), has taken the initiative to privatize and will delist from Hong Kong stocks.

Recently, Weiqiao Textile announced that the major shareholder Weiqiao Group intends to privatize the company by absorption merger through Weiqiao Textile Technology, and the H shares are priced at HK $3.5 per share, a premium of 104.68% over the pre-suspension share price. In addition, the cancellation of domestic shares to domestic shareholders (except Weiqiao Group) to pay 3.18 yuan per domestic share.

According to Weiqiao Textile has issued 414 million H shares and 781 million domestic shares (Weiqiao Group holds 758 million domestic shares), the funds involved are 1.448 billion Hong Kong dollars and 73 million yuan respectively. After the relevant conditions are met, the company will be delisted from the Hong Kong Stock Exchange.

Upon completion of the merger, Shandong Weiqiao Textile Technology Co., LTD. (hereinafter referred to as “Weiqiao Textile Technology”), a new company of Weiqiao Group, will undertake all assets, liabilities, interests, businesses, employees, contracts and all other rights and obligations of Weiqiao Textile, and Weiqiao Textile will eventually be cancelled.

Weiqiao Textile was listed on the main board of the Hong Kong Stock Exchange on September 24, 2003. The company is mainly engaged in the production and sales of cotton yarn, grey cloth, denim business and polyester fiber yarn and related products business.

Under the Zhang family at the helm of Weiqiao Group, there are three listed companies: Weiqiao Textile, China Hongqiao (1378.HK) and Hongchuang Holdings (002379) (002379.SZ). Weiqiao Textile, which has landed in the capital market for more than 20 years, suddenly announced its delisting, and how is the Zhang family playing chess?

 
Privatization accounts

According to the disclosure of Weiqiao Textile, there are mainly three reasons for privatization delisting, including pressure on performance and limited financing capacity.
First, affected by the macro environment and the development trend of the industry, Weiqiao Textile’s performance was under pressure, and the company lost about 1.558 billion yuan last year and 504 million yuan in the first half of this year.
Since 2021, the company’s domestic markets, where it operates in textiles, power and steam, have been under pressure. The textile industry continues to face multiple challenges such as high production costs and changes in global supply chains. In addition, the domestic power industry has shifted to clean energy, and the proportion of coal power production capacity has decreased.
The implementation of the merger will provide greater flexibility for the company’s long-term strategic choices.
Second, Weiqiao Textile has lost its advantages as a listing platform, and its equity financing ability is limited. Upon completion of the merger, H shares will be delisted from the Stock Exchange, helping to save costs related to compliance and maintaining listing status.

Since March 11, 2006, Weiqiao Textile has not raised any capital in the public market by issuing shares.
In sharp contrast, the data show that Weiqiao Textile since 2003 listed, cumulative dividends 19 times, the company’s cumulative net profit of 16.705 billion Hong Kong dollars, cumulative cash dividends of 5.07 billion Hong Kong dollars, the dividend rate reached 30.57%.
Third, the liquidity of H shares has been low for a long time, and the cancellation price is set at an attractive premium to the H stock market price, providing valuable exit opportunities for H share shareholders.
Weiqiao Textile is not alone.
According to the reporter’s statistics, more than 10 Hong Kong listed companies have sought privatization and delisting this year, of which 5 have completed privatization. The reasons for privatization are nothing more than depressed stock prices, poor liquidity, declining performance, and so on.
Financial respondents pointed out that some companies’ stock prices have been underperforming for a long time, and the market value is far below their real value, which can lead to companies unable to obtain sufficient financing through the stock market. In this case, a private delisting becomes an option, as it allows the company to avoid short-term market pressures and gain more autonomy and flexibility to make long-term strategic plans and investments.
“The operating costs of listed companies include listing costs, compliance costs to maintain listing status, and information disclosure costs. For some companies, the cost of maintaining a listed status can become a burden, especially when market conditions are poor and the ability to raise capital is limited. A private delisting can reduce these costs and improve the company’s operational efficiency.” The person said.
In addition, it said that due to the lack of liquidity in the Hong Kong stock market, the shares of some small and medium-sized market capitalization companies are depressed and their financing ability is limited. In this case, a private delisting can help the company get rid of liquidity problems and provide it with greater flexibility for future development.
It is worth noting that the privatization of Weiqiao Textile is still in flux.
It is reported that due to the preconditions of the merger agreement (that is, the acquisition or completion of the merger with or by the Chinese authorities filing, registration or approval, if applicable) has not been reached, on December 22, Weiqiao Textile issued an announcement saying that it has obtained the executive’s agreement to delay the delivery of the comprehensive document.
In the announcement, Weibridge Textiles cautions that there is no assurance by the Offeror and the Company that any or all of the preconditions or such conditions will be achieved and therefore the Merger Agreement may or may not become effective or, if so, may not necessarily be implemented or completed.

Anchor new directions for development

Once Weiqiao Textile delisted, the Zhang family listed companies only China Hongqiao, Hongchuang Holdings two.
Weiqiao Group is one of the world’s top 500 companies and the tenth of China’s top 500 private companies. Located at the south end of Lubei Plain and adjacent to the Yellow River, Weiqiao Group is a super large enterprise with 12 production bases, integrating textile, dyeing and finishing, clothing, home textile, thermal power and other industries.
Weiqiao Group is also known as the “King of the Red Sea” Zhang Shiping proud work. Looking back on the history of Weiqiao Group, it is not difficult to find that it has repeatedly picked the “red Sea” to start, in the old industrial fields such as the textile industry and non-ferrous metal industry, Zhang Shiping led Weiqiao Group to break through the siege and even rushed to the world first.
From the perspective of the development of the textile industry, after Zhang Shiping joined the work in June 1964, he successively served as the worker, workshop director and deputy factory director of the fifth oil cotton Factory in Zouping County. Because of its “can bear hardships, the most hard-working”, in 1981 he was promoted to Zouping County fifth oil cotton factory director.
Since then, he has embarked on sweeping reforms. In 1998, Weiqiao Cotton Textile Factory was reorganized as Weiqiao Textile Group. In the same year, Zhang Shiping began to build his own power plant in order to reduce costs, which are far lower than the national grid. Since then, he has led Weiqiao Textile all the way to become the world’s largest textile factory.
In 2018, after the founder of Weiqiao Group Zhang Shiping stepped down as chairman, his son Zhang Bo took over the helm of Weiqiao Group. Unfortunately, on May 23, 2019, Zhang Shiping passed away, four and a half years ago.
Zhang Shiping has two daughters and one son, the eldest son Zhang Bo was born in June 1969, the eldest daughter Zhang Hongxia was born in August 1971, and the second daughter Zhang Yanhong was born in February 1976.
At present, Zhang Bo serves as the chairman of Weiqiao Group, Zhang Hongxia is the Party secretary and general manager of the group, and the two people also carry the aluminum and textile flags of the group respectively.
Zhang Hongxia, who is also the chairman of Weiqiao Textile, is the first of Zhang Shiping’s three children to follow their father’s struggle. In 1987, at the age of 16, she entered the factory, started from the textile line, and witnessed the development and growth of Weiqiao Textile all the way.
After the delisting of Weiqiao Textile, how will she lead the development of the textile business of the group to depth?
It is reported that in November this year, the Ministry of Industry and Information Technology and other four departments jointly issued the “Textile industry quality upgrading Implementation Plan (2023-2025)”, which provides a clear development goal and direction for the future development of the textile industry.
On December 19, Zhang Hongxia said at the 2023 China Textile Conference that Weiqiao Group will take the above documents as guidance, earnestly implement the key deployment of the China Textile Federation’s “Action Outline for the Construction of a modern Textile Industrial System”, focus on the development strategy of “high-end, intelligent and green”, and position itself according to “science and technology, fashion and green”. Promote sustainable and high-quality development of enterprises.
Zhang Hongxia further pointed out that one is to improve the proportion of intelligence and accelerate the realization of digital transformation; Second, strengthen technological innovation and increase R&D investment; The third is to optimize the adjustment of product structure and develop products with high added value and high technology content; Fourth, adhere to green and sustainable development, and contribute more to the construction of a modern textile industrial system with integrity, advanced nature and safety.

Layout “Textile +AI”

The Red Sea is also a sea. In the traditional old industry of textile industry, with the change of The Times and the rapid development of science and technology, transformation and technology empowerment have become the inevitable trend of the development of the industry.
Looking forward to the future, “to develop AI” will be the key word that traditional enterprises such as Weiqiao Textile cannot get around. As Zhang Hongxia mentioned, intelligence is one of the directions for the future development of Weiqiao Textile.
From the practice of Weiqiao Textile in recent years, as early as 2016, Weiqiao Textile launched its first intelligent factory. 150,000 sensors are installed on the production line of the company’s “textile +AI” artificial intelligence workshop.
“Although we are a traditional industry, we must constantly use new technologies and new processes to improve our production level, so that we have conditions, capabilities and solutions at any time.” Zhang Bo said in a recent interview with the media.
Up to now, the company has built 11 intelligent branch factories, including Weiqiao Textile Green intelligent Factory, Weiqiao extra-wide printing and dyeing digital Factory, Jiajia Home Textile and Xiangshang Clothing digital project, focusing on the two major focuses of “industrial chain data connection” and “intelligent production”.
According to the official micro introduction of “Weiqiao Entrepreneurship”, at present, Weiqiao Textile has created a complete chain production system of “textile – printing and dyeing – clothing and home textiles”, promoting the digital upgrading of the industry with an intelligent matrix, saving more than 50% of labor, reducing energy consumption by more than 40%, and saving more than 20% of water.
A set of latest data shows that Weiqiao entrepreneurship develops more than 4,000 new products every year, covering more than 20,000 varieties of 10 major series, the highest yarn count of cotton yarn reached 500, the highest density of grey cloth reached 1,800, which are in the leading level of the same industry, and a total of more than 300 innovative achievements have obtained national patents.
At the same time, Weiqiao Group has in-depth cooperation with major universities and research institutes, and continues to increase investment in scientific and technological research and development, and has successfully developed high-quality and functional new products such as micro-nano Mosaic textile series, Lycel high branch series, nano ceramic heating functional textile series.
Among them, the micro and nano Mosaic functional series products project breaks through the fiber scale limit of traditional spinning processing, and realizes the antibacterial and anti-mite serialized yarn and textile production with high efficiency and multi-function integration.
In the view of the industry, the textile industry needs to actively embrace technology in the new era, only through technological innovation and digital transformation, in order to achieve industrial upgrading and sustainable development.
“During the ’14th Five-Year Plan’ period, all the intelligent transformation of stock assets has been completed, and the level of intelligent manufacturing has been continuously improved.” We will strengthen industrial chain coordination and jointly promote core technology breakthroughs in intelligence and digitalization. Accelerate digital transformation and improve operational efficiency.” Zhang Hongxia recently participated in the event said.

Source: 21st Century Business Herald