Hengtong Optic-Electric plans to purchase 51% stake in Huawei Marine

On June 3, Hengtong Optic-Electric announced that the company is planning to purchase 51% of the equity of Huawei Marine Networks (Hong Kong) Co., Ltd. (hereinafter referred to as "Huawei Marine") held by Huawei Technologies Investment Co., Ltd. (hereinafter referred to as "Huawei Investment") through the issuance of shares and payment of cash.

As there is still uncertainty about the relevant matters, in order to safeguard the interests of investors and avoid a significant impact on the company's stock price, in accordance with the relevant regulations of the Shanghai Stock Exchange, upon the company's application, the company's shares and convertible bonds will be suspended from the opening of the market on June 3, 2019. The suspension period is expected to be no more than 10 trading days.

The announcement shows that Huawei Marine was established on January 25, 2008 and is currently mainly engaged in the construction of global submarine cable communication networks, providing customers with product technology solutions and end-to-end services including project management, engineering implementation and technical support. It is a submarine cable communication network construction solution provider. 

On May 31, 2019, Hengtong Optic-Electric and Huawei Investment signed a "Transaction Letter of Intent". Both parties agreed to hire an asset appraisal company with securities and futures qualifications to evaluate the target company, and the final transaction price of Huawei Marine was based on the appraisal value and was determined by negotiation between the two parties.

Hengtong Optics said that the two parties have not yet signed a formal transaction agreement, and the specific transaction plan is still under discussion and verification, and there is still some uncertainty. This transaction still needs to be submitted to the company's board of directors and shareholders' meeting for review, and can only be officially implemented after approval by the competent regulatory agency. There is still some uncertainty as to whether it can pass the approval.

As we all know, Huawei is in the vortex of the Sino-US trade war. On May 16, the US Department of Commerce imposed export controls on Huawei Technologies Co., Ltd. and its 68 subsidiaries.

On the evening of May 24, according to Bloomberg, Huawei is seeking loans of about US$1 billion from several banks. This is the first time the company has sought large-scale financing after being hit by US restrictions.

According to an unnamed well-known person, Huawei is currently seeking offshore loans in US dollars or Hong Kong dollars, targeting five-year and seven-year loans. Negotiations with several banks are still in the early stages, and there is no guarantee that an agreement will be signed. Huawei has not yet responded to this matter.

Hengtong Optics is also caught up in a financial crisis. A self-media outlet published an article titled "The Mystery of Hengtong Optics' 3.3 billion advance payment and the Group's 6.9 billion other receivables", accusing Hengtong Optics of frequent financing and misappropriation of funds raised through private placement.

On May 13, affected by this incident, Hengtong Optics, with a market value of 30 billion yuan, hit the lower limit and its market value evaporated by more than 3 billion yuan in one day.

In response to this matter, the company issued an announcement on May 14, stating that some of Hengtong Optics' investors in the private placement had "no other financial transactions other than capital contributions" with other accounts receivable customers of Hengtong Group. "The company's business operations and fund management are completely independent of Hengtong Group, and it has not provided funds directly or indirectly to the controlling shareholder and actual controller in any way."