BYD's "largest" acquisition in history! 15.8 billion yuan cash acquisition of important business of this enterprise

The largest acquisition case in BYD's history has been preliminarily finalized.

On the morning of August 28th, BYD and its controlling subsidiary BYD Electronics announced on both the A-share and Hong Kong stock markets that BYD Electronics has signed a framework agreement with Jeep Singapore to acquire the seller's product manufacturing business located in Chengdu and Wuxi, including the component manufacturing business of existing customers, for approximately RMB 15.8 billion in cash.

On August 28th, BYD's stock price opened high and closed low, while BYD Electronics fluctuated upwards after opening low for more than 8 points. As of the press release, BYD's closing price was 235.53 yuan, an increase of 1.26%; The stock price of BYD Electronics was HKD 33, a slight increase of 0.46%.

The largest merger and acquisition in history

15.8 billion yuan cash acquisition

On the morning of August 28th, BYD announced that the company held a board meeting on August 26th and approved the proposal to sign a framework agreement for the acquisition of its subsidiary. BYD Electronics agreed to sign a framework agreement with Jeep Singapore for approximately RMB 15.8 billion in cash to acquire the production and manufacturing of products in Chengdu and Wuxi, including the production and manufacturing of components for existing customers.

At present, the seller has established a new legal entity in Singapore, Juno Newco Target Holdco Singapore Pte. Ltd., and plans to restructure the target business to the target company. BYD Electronics and its subsidiaries will acquire 100% equity of the target company. BYD Electronics and Jeep Singapore have completed the signing of the framework agreement on the same day.

BYD Electronics and Jeep Singapore will sign a separate final agreement to determine the final transaction consideration, transaction plan, transaction terms, external approval, seller's restructuring plan, and delivery procedures for the acquisition transaction. The acquisition price will also be subject to the usual delivery account adjustment mechanism, including corresponding adjustments to cash, liabilities, and net working capital before and after delivery.

According to WIND's statistics, this acquisition is the largest in BYD's history. Previously, BYD's largest acquisition amount was approximately 3.5 billion yuan.

BYD officials also stated that this is the largest acquisition in the company's history.

According to WIND data, as of the end of the first quarter of 2023, BYD's monetary funds were 56.28 billion yuan; As of the end of 2022, BYD Electronics had a year-end cash balance of 6.24 billion yuan.

Increase product market share

BYD Electronics is a holding subsidiary of BYD, with its business covering diversified market areas such as smartphones, tablets, new energy vehicles, smart homes, communication equipment, medical and health equipment, etc.

BYD stated that this acquisition will expand the customer and product boundaries of BYD Electronics, expand its smartphone parts business, significantly improve its customer and product structure, promote the upgrading of BYD Electronics industry, enter a new round of high-speed growth cycle, and "effectively coordinate with BYD Electronics' existing products while increasing product market share.".

The counterparty, Jeep Singapore, is a wholly-owned subsidiary of Jeep, a company listed on the New York Stock Exchange. In August 2023, Jeep was selected for the Fortune Global 500 list and ranked 456th.

Jeep Technology Co., Ltd. was established in 2012, with a total of three phases planned. Originally planned to be the largest and most modern factory of Jeep Group in the world. There are currently two major business groups, Metal and FATP, mainly engaged in the processing of mechanical and electronic products, with over 60000 employees. The factories are located in Chengdu and Chongzhou Economic Development Zone.

As early as 2004, Jeep Technology had established a business in Wuxi, specializing in the design and manufacturing of consumer electronic and mechanical components. After Jeep Group acquired Taiwan Green Dot Technology in 2007, Wuxi High tech Zone became an important production base for Jeep Technology. Jeep Green Dot is mainly engaged in the research and development and manufacturing of precision components for mobile communication terminals, with a sales revenue of approximately 17 billion yuan in 2021. The company also provides screen manufacturing services for Apple's iWatch.

In April 2022, the AI intelligent terminal module R&D and manufacturing base project of Jeep Green Dot, with a total investment of 10 billion yuan, signed another contract with Wuxi. The expected annual sales revenue of the project after reaching production is 30 billion yuan.

On August 25th, Jeep's stock price fell slightly by 0.38%; However, from early May to mid July, Jeep's stock price surged by 53%.

Performance exceeded expectations in the first half of the year

Previously, BYD Electronics announced on the Hong Kong stock market that its Q2 performance significantly exceeded expectations. The company expects that in the first half of 2023, shareholder attributable profits will increase by approximately 115% -146% year-on-year.

According to the first Shanghai calculation, BYD Electronics achieved a net profit attributable to shareholders of 1.36 to 1.56 billion yuan in the first half of the year; Q2 net profit was 900 million to 1.1 billion, a year-on-year increase of 98.5% -142.5%, and a month on month increase of 96.3% -139.9%, both significantly exceeding expectations.

Shanghai believes that this is mainly due to the following reasons:

Firstly, starting from Q4 2022, the company's core product share for North American customers began to increase, and further growth was achieved in Q2 2023. With the steady increase in capacity utilization compared to the previous month, the marginal improvement in assembly gross profit margin was significant;

Secondly, Android business Q2 achieved limited recovery compared to the previous period. According to data released by the China Academy of Information and Communications Technology, the domestic market's mobile phone shipments in May 2023 were 26.04 million units, a year-on-year increase of 25.2% and a month on month increase of 44%, indicating signs of recovery. From January to May 2023, the total shipment volume of mobile phones in the Chinese market reached 108 million units, a year-on-year decrease of 0.7%.

According to the industry chain research in June, First Shanghai is expected to see a moderate increase in mobile phone shipments in June compared to May, and a positive year-on-year increase in cumulative shipments in the first half of the year.

Thirdly, the new energy vehicle business achieved significant growth compared to Q1. According to the sales data released by the parent company BYD, the Q2 sales of BYD increased by 27% compared to Q1. The sales of the company's new energy vehicle business are dependent on the sales of the parent company, coupled with the large-scale shipment of new product categories. Therefore, it is expected that the company's new energy vehicle revenue in Q2 will achieve a significant increase compared to Q1, which will significantly increase its profit contribution.

Fourthly, the energy storage business continues to advance.