China

Digital China Group Plans to Acquire Qixing Education for RMB 4.65 Bln

Summary:

  • Digital China Group (000034.SZ) plans to acquire a 100% stake of Qixing Education Co. for RMB 4.65 billion , as reported by Sohu.
  • The shares of Digital China Group will continue to be halted from trading.

Why It Matters:

  • Digital China Group will pay RMB 920 million in cash and issue 203 million shares at RMB 18.3 per share to finance the deal. After the transaction, Digital China’s current Chairman of the Board, Guo Wei, will continue to be the controlling shareholder and actual controller of the company with a 21.5% stake.
  • Qixing Education Co. is a study-abroad consulting agency. In order to protect investors’ interests, Qixing Education Co. has promised a minimum combined net profit of RMB 900 million for the years 2017-2019 and if it does not achieve this goal, Qixing Education Co. will pay compensation.
  • However, Qixing Education Co.’s promise appears to be too difficult to achieve. During the first eight months of 2017, the company only posted RMB 73 million in net profit with RMB 710 million in revenue.