Recently, Haier Smart Home Co., Ltd. (600690.SH/690D.DF, hereinafter referred to as “HSH”) privatized Haier Electronics Group Co., Ltd. (1169.HK, hereinafter referred to as “HEG”) – its HK-listed subsidiary – by way of scheme of arrangement. The scheme shareholders of HEG will receive newly issued H-shares of HSH and cash payment by HEG as the consideration for the privatization, and the newly issued H-shares will be listed on the Main Board of the Hong Kong Stock Exchange by way of introduction. CICC acted as the Lead Financial Advisor in the privatization, Joint Sponsor for HSH’s listing by introduction and Sole Financial Advisor for HSH’s major asset restructuring.

CICC led the design of the innovative transaction plan, creating many precedents for HK privatization and H-share listing transactions:

1. The largest size: The transaction is the largest H-share privatization of a Chinese enterprise this year and the largest ever H-share privatization in the home appliance industry. CICC has been cultivating in the area of H-share privatization for many years, acting as the Financial Advisor for 6 of the top 10 H-share privatizations of Chinese enterprises since 2016. The transaction is also the largest H-share listing by introduction in history;

2. The innovative model: This is the first ever transaction of an A-share listed company that completed both privatization of an H-share listed company via H-share issuance and H-share listing by introduction in parallel, innovating a brand new model for the integration of A-share listed companies of H-share listed companies, and achieving seamless conversion of Haier Group’s HK listing platform by executing several work streams simultaneously. After the completion of the transaction, HSH will become the first company in the world that is tri-listed in Shanghai, Hong Kong and Frankfurt;

3. The high efficiency: The transaction involved simultaneous execution of H-share privatization, H-share listing by introduction and A-share major asset restructuring, and required simultaneous compliance with regulatory requirements in Shanghai, Hong Kong and Germany and coordinated information disclosure in the three listing venues. CICC perfectly balanced the execution quality and efficiency for a large complex transaction with the theoretically highest speed possible;

4. The optimal transaction plan with fully investment value mining: As both parties in the transaction were listed companies, the transaction required voting by disinterested shareholders at the two companies’ shareholders’ meetings. The transaction plan perfectly balanced the interests of the shareholders of HSH and HEG, and the Company’s investment value and potential synergies were fully extracted and conveyed to the shareholders, winning >99% support at the shareholders’ meetings of the two companies.

Introduction to HSH and HEG

HSH was listed on the Main Board of the Shanghai Stock Exchange (600690.SH) in 1993 and the CEINEX D-Share Market of Frankfurt Stock Exchange (690D.DF) in 2018. In 2019, HSH recorded revenue of RMB200.8bn and net profit attributable to shareholders of the parent company of RMB8.2bn. HEG is registered in Bermuda and listed on the Main Board of the Hong Kong Stock Exchange (1169.HK) in 1997. In 2019, HEG recorded revenue of RMB75.9bn and net profit attributable to shareholders of the parent company of RMB7.4bn.

Prior to the transaction, Haier Group and its concerted parties held and controlled a total of 40.03% of HSH. HSH and its wholly-owned subsidiaries held a total of 45.68% of HEG, and HEG was included in the scope of consolidation of HSH. HSH was mainly engages in R&D, manufacturing and distribution of products including refrigerators/freezers, laundry appliances, air-conditioners, water heaters, water purifiers, kitchen appliances and small home appliances, and the businesses of laundry appliances, water heaters, water purifiers and channel services in the domestic were operated by HEG.

The transaction is a major move for HSH to implement the IoT-based smart home ecosystem brand strategy. It aims to optimize the organization structure and shareholding structure, thereby carrying out in-depth business integration, improving operating efficiency, and further optimizing resource allocation on a global scale. With global resource sharing, HSH will create synergies, amplify competitive advantages, implement the strategies of leading by scenario and leading by ecosystem, create new growth engines in the era of IoT, and enhance long-term returns for shareholders.

As the Lead Financial Advisor in the privatization, Joint Sponsor for listing by introduction and Sole Financial Advisor for major asset restructuring, CICC assembled an experienced and capable execution team, played a leading role throughout the execution and contributed our professional capabilities. The contributions of CICC included:

Leading the design of an innovative transaction structure, which balanced the interests of the shareholders of both HSH and HEG. CICC led the design of the unprecedented transaction structure and introduced an innovative model of integration across the A-share and H-share capital markets. Meanwhile, with in-depth analysis and discussion, CICC found the optimal solution in the space of pricing. The reasonable pricing balanced the interests of the A-share and D-share shareholders of HSH and the H-share shareholders of HEG, allowing the shareholders of both HSH and HEG to enjoy the potential synergies and the broad development space of the integrated platform in the future.

Taking overall coordination of all work streams at home and abroad, including the design of the transaction plan and fund flow path, communication with shareholders, and the coordination of the transaction process and information disclosure. CICC took overall coordination for all four parallel work streams at home and abroad, i.e., H-share privatization, A-share major asset restructuring, H-share listing by introduction and conversion of HSH’s EB to H-share CB, and made sure coordinated information disclosure of HSH and HEG.

Activly communicating with the relevant regulatory authorities regarding the transaction structure, and promoting a smooth close of the transaction. The transaction involved a complex review, approval and filing processes with various domestic and overseas regulatory authorities. CICC took the lead in assisting the Company in active communication before and after the filing, winning the support of all regulatory authorities. Especially, the transaction passed the hearing of the HKEX in just one month, which facilitated the smooth execution of the transaction.

Fully tapping the investment value and fully communicated with shareholders to support the transaction to be approved by a majority of votes. It was especially important to tap the investment value as the transaction involved both privatization and H-share listing. CICC fully leveraged its knowledge in both companies to tap the Company’s potential synergies and presented the Company’s future development prospects. On this basis, CICC accompanied the two listed companies in conducting meetings with various types of shareholders at home and abroad, laying a solid foundation for the transaction to be successfully approved by the shareholders’ meetings. The transaction was highly recognized by all shareholders of HEG and HSH, winning the support of 99% shareholders at the HSH’s general shareholders’ meeting, Class-A shareholders’ meeting and Class-D shareholders’ meeting, as well as the support of 99.99% and 99.98% independent shareholders at HEG’s extraordinary shareholders’ meeting and court meeting, respectively.

Playing the role of Project Management Office (PMO); creating benchmark efficiency with orderly project management system and efficient execution. Fully playing the role of PMO in this transaction, CICC developed a professional and tight timetable, controlled the overall pace and coordinated various working groups and intermediaries with its expertise in cross-border execution. Despite the complex regulatory approval and information disclosure process across three listing venues, as well as the changing pandemic situations across the domestic and overseas, CICC strictly followed the timetable. CICC has created a new benchmark in the industry for execution efficiency and transaction speed, winning high recognition from the Company and investors.

CICC enjoys a leading position in H-share privatization. Among the completed privatizations of H-share listed Chinese enterprises since 2015, CICC led the execution of more than 30% transactions by the number of transaction, as well as 7 of the top 10 transactions by acquisition size, including CNBM’s merger of Sinoma via share swap, the privatization of Dalian Wanda Commercial Properties and the privatization of Intime Retail (Group). CICC also executed a number of benchmark innovation deals, including the privatization of Denway Motors by GAC Group – the first listing by introduction in Hong Kong by privatizing a HK-listed company via share swap, the merger of CSR and CNR – the first merger between two A+H dual-listed companies via share swap, and the privatization of Dalian Wanda Commercial Properties – the largest H-share cash privatization.

CICC enjoys a leading position in H-share listing, ranking No. 1 Lead Sponsor among all investment banks in H-share listing deals since 2015 by both the number of deals completed and the financing size. CICC also completed 8 of the top 10 H-share IPOs of Chinese companies since 1997, including that of Alibaba, China Tower and ABC; and 7 of the 8 IPOs completed by CICC were the largest IPO of the year. In addition, after the introduction of the new chapters to the Listing Rules by the HKEX in 2018, CICC has quickly completed a number of influential deals under the chapters, demonstrating our strength as a leading H-share IPO house. CICC has completed 14 deals under Chapter 18A – which targets biotechnology companies – since its introduction, including the IPO of Junshi Biosciences – the first dual-listed company on the NEEQ and the HKEX. CICC also completed 8 of the 10 deals completed under Chapter 19C – which targets Chinese companies that seek secondary listing – since its introduction, including Alibaba’s IPO on the HKEX – the first secondary listing under the chapter (CICC acted as Lead Sponsor).

Upholding the values of “Chinese Roots and International Reach” and “By the People and For the Nation”, CICC will leverage the extensive capital market experiences and the capability of seamlessly integrating domestic and overseas businesses to customize the optimal capital market solutions for enterprises to support their strategic development goals.