Brilliance China Chairman Wu Xiaoan detained by the Hong Kong Independent Commission Against Corruption for investigation! Hong Kong | ICAC | Brilliance China Board of Directors
On August 8th, Brilliance China announced that on August 3rd, 2023, personnel from the Hong Kong Independent Commission Against Corruption visited the company's main place of business in Hong Kong to carry out a search warrant. The board of directors also learned that Executive Director and Chairman Wu Xiao'an was detained and investigated by the Independent Commission Against Corruption on August 3, 2023, suspected of violating Section 9 of the Prevention of Bribery Ordinance, Chapter 201 of the Laws of Hong Kong. He was released on bail on August 4, 2023, without charge.
Public information shows that Wu Xiao'an has 28 years of experience in the automotive industry and is a veteran of the Huachen series. He has been serving as the Chairman of the Board of Directors of Huachen China since June 18, 2002, and as an Executive Director since January 11, 1994. He is currently a member of the Huachen National Compensation Committee, Nomination Committee, and Subsidiary Executive Appointment Committee. Wu Xiao'an is mainly responsible for the overall strategic planning and business development of the group at Brilliance China. He served as the Chairman of Brilliance BMW from May 2003 to February 2022, and as the Vice Chairman of Brilliance BMW from February 2022. I served as a director of Brilliance Renault from January 1994 to August 2016, and as the chairman of Brilliance Renault from January 2018. In February this year, Wu Xiao'an was punished for illegal and irregular information disclosure by Huachen Automobile Group Holding Co., Ltd.
On August 3rd, Huachen China announced a suspension of trading on the same day, awaiting insider information. Before the suspension, Huachen China's stock price was at HKD 3.94 per share, with a total market value of HKD 19.878 billion. After resuming trading on the afternoon of August 8th, the stock price of Huachen China plummeted by more than 7%, falling 3.81% to HKD 3.79 as of closing, with a total market value of HKD 19.1 billion.
After multiple delays, Huachen Automobile's restructuring plan has finally been finalized and approved. According to the announcement released by Jinbei Automobile, a listed company in the Huachen series, on August 3rd, the Shenyang Intermediate People's Court ruled to approve the substantive merger and reorganization plan of 12 enterprises including Huachen Automobile Group Holding Co., Ltd. on August 2nd, and terminated the reorganization procedures of 12 enterprises including Huachen Group. Shenyang Automobile Co., Ltd. will own 100% equity of Huachen Group and become an indirect controlling shareholder of Jinbei Automobile. The actual controller will be changed to the State owned Assets Supervision and Administration Commission of Shenyang Municipal People's Government.
Shenhua Holdings also announced on August 3 that as of the announcement date, its indirect controlling shareholder, Huachen Automobile, directly and indirectly holds a total of approximately 446 million shares of the company's shares through Liaoning Zhengguo and Liaoning Huasheng, accounting for 22.93% of the company's total share capital. Shenyang Automobile will become the indirect controlling shareholder of the company, and the actual controller of the company will be changed to Shenyang State owned Assets Supervision and Administration Commission.
According to Tianyancha information, Shenyang Automobile Co., Ltd. is a wholly-owned subsidiary of Shenyang Cairui Investment Co., Ltd., established in February 2023. Shenyang Cairui is jointly owned by Shenyang Caisheng Investment Fund Co., Ltd. and Shenyang Metro Operation Co., Ltd., with a shareholding ratio of 50% each. The actual controllers of both companies are the State owned Assets Supervision and Administration Commission of Shenyang City.
On June 14th this year, Shenyang Automobile Co., Ltd. and 12 other enterprises and managers including Huachen Group jointly signed an investment agreement for the substantial merger and reorganization of 12 enterprises including Huachen Automobile Group Holding Co., Ltd. Shenyang Automobile intends to act as the overall investor to acquire 100% equity of Huachen Group and undertake the assets of 12 substantially merged and restructured enterprises including Huachen Group, including the control rights and other non listed assets of three listed companies, Huachen China, Jinbei Automobile, and Shenhua Holdings, as well as the financing leases listed in Annex 1.
In this investment, Shenyang Automobile did not provide a separate quotation for the equity related assets of Huachen China, Jinbei Automobile, and Shenhua Holdings held by the restructured enterprise. The transaction consideration for Shenyang Automobile's investment in this project does not exceed RMB 16.4 billion. The main transaction structure is to adjust the equity of Huachen Group to Shenyang Automobile through shareholder equity adjustment, with funds sourced from Shenyang Automobile's own and self raised funds.
Huachen Automobile is a key state-owned enterprise under the State owned Assets Supervision and Administration Commission of Liaoning Province. It has four listed companies, namely Huachen China, Jinbei Automobile Co., Ltd., Shanghai Shenhua Holdings Co., Ltd., and Xinchen China Power Holdings Co., Ltd. In August 2020, several surviving bonds under Huachen Motors experienced a sharp decline, and since then, Huachen Motors has fallen into a debt crisis. In November 2020, Huachen Automobile officially entered bankruptcy reorganization proceedings, and the reorganization plan has been postponed multiple times since then.
The weakness of the independent sector of Huachen Automobile Group is a key factor leading to its debt crisis. In the past few years, Huachen Zhonghua, the independent passenger car division of Huachen Motors, was in a difficult situation, and Jinbei Motors, the light bus business, also entered a downward trend after 2010. Huachen Automobile's independent brand vehicle business includes products such as "Huachen Zhonghua", "Huasong", and "Huachen Jinbei". In recent years, Huachen Zhonghua has had very few actual models for sale, and sales have also been relatively poor.
And BMW Brilliance has always been the profit pillar of Brilliance Auto. According to the financial report of Brilliance China, from 2015 to 2019, after excluding the profits of Brilliance BMW, its overall loss was 3.484 billion yuan. The cumulative profit of Brilliance BMW over the past five years reached 26.9 billion yuan, which means that the only profitable company is the joint venture of Brilliance BMW. In 2018, Huachen Motors sold 25% of its equity in the joint venture to BMW for 3.6 billion euros, making it the first joint venture in China to break the 50:50 share ratio between China and foreign countries. In February 2022, BMW Group officially changed its stake in Brilliance BMW to 75%.
Nowadays, Shenyang Automobile has become the takeover party for the restructuring of Huachen Automobile, which means that Huachen Automobile will ultimately be taken over by the government. The huge debt is one of the important factors leading to the continuous delay of Huachen Automobile's restructuring plan, which also makes it difficult for it to find suitable companies to take over. According to previously disclosed information, as of June 1, 2022, a total of 6029 creditors have declared their claims to the manager of Huachen Group, with a total amount of 57.718 billion yuan. There are still creditors who have not declared their claims, totaling 13.294 billion yuan, and employee claims that do not need to be declared, totaling 786 million yuan. The total liabilities of Huachen Group reach approximately 71.8 billion yuan.
Huachen China stated that it is currently researching and exploring multiple investment opportunities, including partnering with BMW to supply components for BMW cars, potentially expanding into new energy vehicle manufacturing and parts business, and other automotive businesses.
