TCL Technology plans to acquire 39.95% stake in Wuhan Huaxing Optoelectronics for RMB 4.217 billion

On May 28, TCL Technology announced that it plans to issue shares, convertible bonds and cash to Wuhan Industrial Investment to purchase 39.95% of Wuhan Huaxing's equity at a price of 4.217 billion yuan. The company plans to pay 47.43% of the transaction price, or 2 billion yuan, by issuing shares; 14.23% of the transaction price, or 600 million yuan, by issuing convertible corporate bonds; and 38.34% of the transaction price, or 1.617 billion yuan, in cash.

At the same time, TCL Technology plans to issue shares and convertible bonds to Hengkuo Investment, Henghui Investment and Pearl River Delta Optimization Development Fund to raise supporting funds of no more than 2.6 billion yuan. The amount of supporting funds raised by issuing shares this time shall not exceed 1.2 billion yuan, and the amount of supporting funds raised by issuing convertible corporate bonds shall not exceed 1.4 billion yuan, of which Hengkuo Investment shall subscribe for shares of no more than 300 million yuan, Pearl River Delta Optimization Development Fund shall subscribe for shares of no more than 100 million yuan, and Henghui Investment shall subscribe for convertible corporate bonds of no more than 1.4 billion yuan. After the completion of this transaction, the total proportion of listed company shares held by Hengkuo Investment, Henghui Investment and Pearl River Delta Optimization Development Fund will be 2.41%, no more than 5%.

As of March 31, 2020, shareholders holding more than 5% of the listed company's shares include Li Dongsheng and his persons acting in concert, Jiutian Liancheng and Huizhou Investment Control. Li Dongsheng and his persons acting in concert hold a total of 1,157,872,411 shares of the listed company, accounting for 8.56% of the listed company's issued shares; Huizhou Investment Control holds 878,419,747 shares of the listed company, accounting for 6.49% of the listed company's issued shares. The listed company has no controlling shareholder or actual controller.

Changes in the listed company's equity structure before and after this transaction

At present, TCL Huaxing's T1, T2 and T6 production lines are fully sold and produced, and its operating efficiency is the world's leading in the industry. With T3's efforts in small and medium-sized sizes, T4 Phase I's ramp-up, and T4 Phase II and Phase III and T7 production capacity gradually opened up, TCL Huaxing will be able to cover all mainstream sizes in the display application field, meet the specific technical and specification needs of customers in various industry applications, further enhance the company's industry position, and drive the growth of operating efficiency and profitability.

TCL Technology said that the acquisition of a minority stake in Wuhan Huaxing by the listed company in this transaction will help the listed company further strengthen its main business, focus on advantageous resources, and further enhance its core competitiveness in the semiconductor display industry. On the one hand, after the completion of the equity acquisition, the listed company will further strengthen its management and control over Wuhan Huaxing, which will help strengthen its support for Wuhan Huaxing's operations and improve the execution efficiency of its business. On this basis, it will deepen its development plan in the semiconductor display field and further enhance the comprehensive competitiveness and profitability of the listed company. On the other hand, this transaction will help the listed company further highlight its core competitiveness in its main business field, prepare for the listed company to expand new competitiveness in the upstream and downstream of the industrial chain in the future, and help further consolidate its leading position in the industry.

At the same time, TCL Technology has introduced strategic investor Hengjian Holdings by issuing shares and convertible corporate bonds to raise supporting funds, which will help further optimize the company's shareholder structure and promote the company's long-term development.

Hengjian Holdings is a provincial-level state-owned capital operation company and an industry-finance integration platform in Guangdong Province. It is the enterprise with the largest net asset scale and the strongest financial strength among the provincial-level enterprises in Guangdong Province. Its business segments cover capital operation, fund investment, equity management, financial services, international business, etc. Hengjian Holdings continues to explore a business model that combines investment with industrial development. It has rich experience in industrial investment and has played an important role in supporting the industrial upgrading and economic development of Guangdong Province in the long term. 

TCL Technology said that with the introduction of Hengjian Holdings as the company's strategic investor, the two parties will carry out in-depth cooperation around the new display technology industry, including but not limited to investment layout in equipment, materials, electronics and other fields, and carry out business cooperation with upstream and downstream of the new display industry chain, which will be conducive to the long-term and healthy development of the company's business.