On July 17, Kehua biology issued a notice to make the latest response to the 10 billion arbitration cases of high concern to the market: from the perspective of protecting the interests of the company and shareholders, especially the public shareholders, Li Ming, one of the 10 billion arbitration applicants, was dismissed as vice president of the company.
According to the data, the 10 billion arbitration dispute originated from a purchase transaction of Kehua biology in 2018 – to increase capital to Xi’an Tianlong Technology Co., Ltd. and Suzhou Tianlong Biotechnology Co., Ltd. (hereinafter collectively referred to as “Tianlong company”) and acquire the equity of Tianlong company held by other shareholders.
Due to the impact of the epidemic, the business of Tianlong company, which mainly operates in vitro diagnostic equipment, has witnessed an explosive growth. The arbitration applicant hereby requests that the overall valuation of the company increase from RMB 900million to 27.5 billion yuan in three years. At that time, the acquisition mode agreed by Kehua biology was the second stage acquisition, and the second stage acquisition has not been completed. The arbitration applicant requested that the subsequent purchase consideration be adjusted dynamically according to the latest operation of Tianlong company.
According to the announcement of major arbitration recently disclosed by Kehua biology, the original four shareholders of Tianlong company require that Kehua bio acquire the remaining 38% of the company’s equity, with the consideration of 25 times of the net profit deducted by Tianlong in 2020, or 10.5 billion yuan.
Obviously, at this consideration, the acquisition cost of Kehua biology will increase significantly, which the company naturally considers “unfair”.
Based on this, the original four shareholders of Tianlong company filed an arbitration application to relevant departments, one of whom was Li Ming, the vice president of Kehua biology who was dismissed.
In the face of novel coronavirus pneumonia, KELONG bio refuted that explosive growth of the income and profits of Tianlong company in 2020 affected by objective factors such as the new crown pneumonia epidemic situation has obviously constituted the situation of “change of circumstances” as stipulated by law. The applicant insists that the arbitration “is obviously contrary to the principle of fairness and is not in conformity with the law”.
It is worth mentioning that in May this year, three listed companies of a shares – Shengxiang biology, Geli real estate and Kehua biology announced that Shengxiang biology intends to transfer 18.63% of the shares of Kehua bio held by the wholly-owned subsidiary of Geli real estate with 1.95 billion yuan, and will become the first largest shareholder in the new Jin of Kehua biology.
Just recently, Kehua biology and Shengxiang biology issued a “Declaration” saying that both sides have signed a strategic cooperation agreement and will jointly push forward the “China Program” for in vitro diagnosis.
“It is also a signal that several parties are still pushing forward the Tianlong equity transfer transaction.” People close to the deal told the Shanghai Securities Journal.
Disputes: dramatic arbitration of 10 billion
In mid July, Kehua biology suffered a 10 billion arbitration dispute. This is due to a 2018 acquisition of Kehua biology, which has brought dramatic disputes over the impact of the epidemic on the increase of profits.
Reprint indicated source：Shine Trader Limited Live information