Dongdian B to A Zhejiang Power will be listed

On August 29, the reorganization plan of Dongfang B’s major assets was unconditionally approved by the reorganization committee of the China Securities Regulatory Commission. According to the previously announced restructuring plan, Zhejiang Zheon Power Co., Ltd. (hereinafter referred to as “Zheoneng Power”) will absorb and merge Eastcom B with newly issued A shares, thus ending the latter’s listing status. Dongdian B will also become the first pure B-share company in Shanghai to solve historical problems.

The successful conversion of Dongdian B into an A-share listed company will have significant implications for Other B-share companies. The B-share companies that are currently in the process of major asset restructuring suspension include Shandong Airlines B, Yuehua B, and Huili B.

Last year, the China Securities Regulatory Commission and the Shanghai and Shenzhen Stock Exchanges began to encourage B-share listed companies to adopt various methods including absorbing mergers, applying for A-share or H-share listing, and privatization to solve their survival and development. In August 2012, CIMC Group, a Shenzhen-listed company, took the lead in publishing the "B-share to H-shares" plan and eventually listed it on the Hong Kong Stock Exchange in a way that introduced listings. Subsequently, one after another deep market B shares company announcement plan.

Compared with the Shenzhen Stock Market, Shanghai B-share companies have made slow progress in resolving historical issues, while the reorganization plan of Dongfang B has opened up the situation. Before the acquisition of the merger, Zhejiangneng Power held a stake of 39.8% in Dongdian B, which was the company's largest shareholder. The reorganization of "one stone with two birds" not only solved the problem of the survival of Dongdian B, but also enabled Zhejiang Zhenneng Power to list its entire A shares.

The two heavyweight investment behaviors provide advisory services for this landmark transaction. CICC acted as financial advisor for the merger of Zheneng Power, and the independent financial advisor of the merged party was Morgan Stanley Huaxin Securities.

Zheneng Power is not a listed company, but after absorbing the merger with Dongdian B, the latter’s legal person qualification is cancelled and loses its listing status. The shareholder structure of Zheneng Power is publicized, and the equity dispersion degree required by the listing conditions can be achieved. Shares listed. Similar cases include Weichai Power's absorption of the Hunan Torch and Guangzhou Automobile Group's merger with Guangzhou Automobile Changfeng.

Senior investment bankers told reporters that this listing method is neither an IPO nor a backdoor, and the current successful cases are basically all listed.

So can other pure B-share companies copy the model of Dongfang B? Some investment bankers believe that there is a certain degree of difficulty. The major shareholder of Dongdian B, which is the combined party of this transaction, is a key local state-owned enterprise of the Zhejiang Provincial Power Group. Its resource mobilization capability is not accessible to the general enterprise. In the review, the Securities Regulatory Commission requested that such mergers and acquisitions be able to achieve the effect of overall listing and integration of resources, which also poses great limitations to the search for reorganization.

However, the successful transformation of Dongdian B will, to a certain extent, boost the market's confidence in solving the B-share problem. Over time, B-shares, the forgotten passage of the Chinese capital market, will finally end.