Xingfa Group (600141) announced on the evening of January 3 that it intends to purchase a 50% stake in Xingrui Silicon Materials held by Yichang Xingfa and Jinfanda through the issuance of shares. After the completion of the transaction, Xingfa Group will hold 100% equity of Xingrui Silicon Materials, and the company plans to raise matching funds.


Before the transaction, Yichang Xingfa held 160 million shares of Xingfa Group, accounting for 22.05% of the total share capital of Xingfa Group. It is the controlling shareholder of Xingfa Group and Jinfanda is the second largest shareholder of listed companies. The secondary transaction constitutes a related transaction. Xingshan County State-owned Assets Bureau holds 100% equity of Yichang Xingfa and is the actual controller of Xingfa Group. After the completion of this transaction, the actual controller of Xingfa Group will not change, and the State-owned Assets Bureau of Xingshan County is still the actual controller of Xingfa Group.


Xingfa Group is principally engaged in the mining and sales of phosphate rock, the production and sales of chemical products such as phosphate, phosphate fertilizer, glyphosate and silicone. Silicone new materials are strategic emerging industries encouraged by the state and are one of the key directions for the future development of Xingfa Group. After years of construction and development, Xingfa Group has a high capacity of organic silicon monomer, and continuously improves the production capacity of downstream products of organic silicon through self-construction, mergers and acquisitions and investment promotion. Initial results, the comprehensive competitiveness of products ranks among the domestic advanced level.


Xingrui Silicon Materials is a holding subsidiary of Xingfa Group and is an important subsidiary of Xingfa Group in the organic silicon industry. In 2016 and 2017, Xingrui Silicon Materials' operating income was 3.089 billion yuan and 3.998 billion yuan respectively, and net profit was 0.66 billion yuan and 346 million yuan respectively. In 2017, operating income and net profit increased by 29.43% and 424.24%. From January to September 2018, Xunrui Silicon Materials' unaudited operating income was 4.124 billion yuan and net profit was 641 million yuan. As of the end of the third quarter of 2018, Xingrui Silicon Materials' unaudited net assets were 1.637 billion yuan.


Xingfa Group said that after the completion of this transaction, Xingrui Silicon Materials will become a wholly-owned subsidiary of Xingfa Group, which will help to concentrate the strength of listed companies, give play to the advantages of listed companies in the capital and industrial chain, and increase the silicone Industrial investment.


It is also worth noting that Xingfa Group will use the funds to reduce the cost of intermediaries after the transaction, and will be used for the construction of silicone technology transformation and upgrading projects, construction of 100,000 tons/year special silicone rubber and silicone oil projects, and repayment of bank loans of listed companies. And supplement the liquidity of listed companies.


As of September 30, 2018, the total assets of Hing Fat Group's consolidated statements were 26.118 billion yuan, total liabilities were 16.96 billion yuan, and the asset-liability ratio was 64.94%, which was at a relatively high level. In 2017 and January-September 2018, the financial expenses of listed companies were 619 million yuan and 458 million yuan respectively. The higher asset-liability ratio limits the financing ability of listed companies, increases the difficulty of financing, financing costs and financial risks, which is not conducive to the long-term stable development of listed companies.


The recruitment of matching funds by Xingfa Group will effectively enhance the capital strength of listed companies, optimize the capital structure of listed companies, reduce the financial expenses and financial risks of listed companies, further enhance the stable development level of listed companies, and the listed companies' anti-risk ability will be Further strengthen.