"Our merger with WM can be divided into three stages: the first stage is the preliminary negotiation and signing of the 'Letter of Intent for Merger and Acquisition' (TS). The second stage is to conduct detailed work such as audit due diligence, legal due diligence, and financial audit. The third stage is for both parties to formally sign the SPA merger agreement and submit it to the NASDAQ exchange for approval, completing the legal merger and acquisition process."
Recently, Lin Mingjun, Chairman and CEO of Happy Automobile, said in an interview with a reporter from China Business Daily. Lin Mingjun told reporters that the acquisition of Weima Automobile by Happy Automobile is currently in the second stage, and the work of the first stage has been completed.
On September 8th, APOLLO Smart Travel Group Co., Ltd. (00860. HK) announced on the Hong Kong Stock Exchange that the relevant parties have agreed to terminate the agreement to acquire Weimar Motors, so the acquisition and placement matters will not proceed.
Just as the outside world was still immersed in Weima Motors' failure to go public again, Happy Automobile announced on September 11th that it had signed a non binding letter of intent with Weima Motors, planning to issue a certain number of new shares to acquire its 100% equity held by its shareholders.
On October 10th, Weima Motors announced that, upon application by Weima Automotive Technology Group, considering that Weima Corporation still has commercial value and salvage value, its corporate governance structure is still complete, it has basic independent negotiation ability, and some creditors also have the intention to restructure. On October 7th, 2023, the Shanghai Third Intermediate People's Court accepted Weima Automotive Technology Group's pre restructuring application.
(Weima's application for pre restructuring) is a small episode in our second stage, "Lin Mingjun told reporters." Weima's own application for pre restructuring to the court is aimed at making Weima's data healthier, which will also be beneficial for our subsequent mergers and acquisitions
The reporter learned that the announcement of Happy Automobile's acquisition of Weima is a comprehensive acquisition. After announcing the merger news, Weima Motors has always been surrounded by negative public opinion, with various news such as founder Shen Hui's overseas travel and unpaid employee salaries emerging one after another. Weima Motors is in a whirlpool of public opinion and finds it difficult to extricate itself. On the other hand, the outside world is more concerned about how Happy Automobile will acquire WM Motor.
Undoubtedly, one is Weima Motors, one of the former four new car making powers, and the other is a relatively low-key Happy Automobile. Such a combination has the necessary factors to arouse external curiosity. So, why did Happy Automobile choose Weima Automobile? What rewards can both parties gain from this "marriage alliance"? With these questions in mind, the reporter had a conversation with Lin Mingjun.
Choosing Weima is because of complementarity
According to relevant information, Happy Automobile entered the second-hand car business with its automotive finance business in 2015 and officially entered the second-hand car retail field in 2017. In 2019, Happy Automobile was listed on NASDAQ, becoming the second used car company in China to successfully go public in the United States.
It is unrealistic for us to start from scratch, and we can only shorten the time cycle by acquiring the target company. There are no more than three types of acquisition targets. Firstly, particularly good targets cannot be acquired because they usually have independent IPOs. Secondly, we cannot acquire large enterprises with very low operating results. "Lin Mingjun said of his understanding of acquisition targets.
Lin Mingjun told reporters: We can only acquire medium-sized enterprises, which have several major characteristics: firstly, they have spent a lot of funds and left behind many intangible assets, such as brand assets, which are relatively well-known; secondly, they have advantages that we lack; thirdly, both parties can integrate into a better enterprise resource. After the merger, the new company must have a large amount of funds to come in at the moment of merger, that is, the acquisition foundation Jin comes in. This is our understanding of the acquisition target
In the news released to the outside world, Happy Automobile does not hesitate to affirm Weima Automobile. Kaixin Automobile stated in a press release that WM has successfully developed and delivered four models in bulk - E5, EX5, EX6, and W6. It is also about to deliver the M7, and has delivered over 100000 intelligent pure electric passenger cars in about 200 cities in China, ranking among the top in product quality and user experience.
At the same time, Weima currently has two Industry 4.0 standard intelligent manufacturing bases - Wenzhou Production Base and Huanggang Production Base. Weima Automobile is the first and rare representative enterprise among new forces in the automotive industry to have both intelligent manufacturing bases and two new energy vehicle production qualifications. It is also the first automotive enterprise among new forces in the automotive industry to achieve full industry chain digitization.
We both have complementary needs. Weima has 4-5 models of cars, as well as two factories in Wenzhou and Huanggang, as well as two new energy vehicle production qualifications, which are all things we are pursuing. "Lin Mingjun said bluntly," In the past three years, we have screened 30 to 40 companies and purchased the target. The successful acquisition is Punk, and we are talking about Weima
When it comes to the complementarity of cooperation with WM, Lin Mingjun said that the major advantage of Happy Automobile is that it is a mature listed company. "The listing path of Weima in the past three years has been very bumpy, starting with the Science and Technology Innovation Board and then going overseas, but it has not been successful, and it will become an obstacle to Weima's development."
Lin Mingjun further explained to reporters, "Happy Automobile was listed on NASDAQ in the United States in 2019, and our financing resources are relatively more abundant than those of an unlisted company. I think the merger of our two sides and the transfusion of capital are very important. Without the transfusion of capital, relying solely on our two teams or existing businesses and products to do complementary things would appear powerless
Simultaneous development of stock issuance and financing
When it comes to the source of funds for the merger and acquisition of Weima, Lin Mingjun bluntly said, "Every time we negotiate with the acquisition target, we will discuss a merger fund to participate in, which will be used for the operation and development of our new company after the merger."
The participation of merger and acquisition funds must support both parties to operate the company well after the merger. We will set a target value that is sufficient to support investors' investment feasibility analysis report. "Lin Mingjun told reporters," These days we are discussing financing intensively, and we definitely want more funds as much as possible, but this fund is not a one-time investment, it is phased
Financing is just one of the ways to solve the funding for the acquisition of WMA, and Lin Mingjun said that Happy Automobile will also issue stocks. "In this way, Weima's shareholders will become happy shareholders."
If the acquisition of Weimar is completed, will both parties launch new brands? Lin Mingjun told reporters that the launch of any new brand must be based on a large amount of promotion resources, and it is necessary to spend money on brand promotion. I think it's quite wasteful
However, due to negative public opinion such as delayed employee salaries and the use of car owner systems, the brand image of Weima has also been damaged. "A brand will definitely experience some difficulties and setbacks in its development process. If both parties succeed in the merger and acquisition, measures must be taken to erase the negative impact of these historical factors and add positive ones," said Lin Mingjun.
Regarding the plan after the merger and acquisition, Lin Mingjun stated that Happy Automobile acquired Punk Automobile in August this year, and two cars have already been mass-produced, namely Punk Meimei and Punk Duoduo. "Of course, we (also) have several models that have been successfully developed but have not yet been mass-produced. If the acquisition of WM is successful, both parties will definitely recombine the products because each product has different dimensions and positioning, so we will sort all products, similar to BMW, Mercedes Benz and other OEMs."
Punk's products are concentrated in the A0 and A00 levels, while Weima's products are medium-sized models. We can sort them out and future production and sales will be sorted based on our progress, which products are prioritized and which products are slightly behind. "Lin Mingjun further explained, "These plans have not been formulated yet because everyone's energy is still focused on the merger and acquisition process, and there is not enough time to sort out the details of the development after the merger and acquisition. Currently, it is only a large framework. The merger and acquisition is still in the second stage, and by the third stage, we will simultaneously work on the specific development plan after the merger and acquisition. Currently, we still need time."
The Chess Game of Happy Automobile Manufacturing
"In the first half of 2021, we completed a reverse merger with overseas Taoche. After the reverse merger, I was responsible for the entire management and board of directors of Happy Automobile. In August 2021, we made a strategic decision to develop new energy vehicles. The stock price surged that night, indicating that capital is very optimistic," said Lin Mingjun.
After announcing its transformation to new energy vehicles, Happy Automobile has carried out a series of layouts. In terms of talent, Happy Automobile announced in May 2022 that it would hire Gu Lei as its strategic advisor to lead the development direction of new energy vehicles. It is reported that Gu Lei has served as the Vice President, Chief Engineer, and President of Beijing Automotive Research Institute of a Fortune 500 company. He has held various positions including Senior Technical Expert at Ford Motor Corporation, President of Chery Automotive Research Institute, Director and General Manager of BAIC Deben Technology Center, and President of Leading Automotive.
Then in July 2022, Happy Automobile released the new energy commercial vehicle brand "Tanlu" (English name TECROLL) to the public. In August of the same year, Happy Automobile announced that its new energy commercial vehicle headquarters was officially established and operated in Suzhou, Anhui Province.
In August of this year, Kaixin Automobile announced the completion of the acquisition and delivery of MORNING STAR AUTO INC. (hereinafter referred to as "Maolinsda"), and Maolinsda officially became a wholly-owned subsidiary of Kaixin Automobile. Maolin Star is a company that produces and operates punk cars.
New energy vehicles have always maintained a high growth trend. According to data from the China Association of Automobile Manufacturers, from January to July 2023, China exported 2.533 million vehicles, a year-on-year increase of 67.9%. Among them, the export volume of traditional fuel vehicles was 1.897 million, a year-on-year increase of 51.5%; The export of new energy vehicles reached 636000 units, a year-on-year increase of 1.5 times, indicating a strong growth trend in exports. A0 level and A00 level micro pure electric vehicles account for 56% of China's new energy vehicle exports, becoming the mainstream model for pure electric vehicle exports.
"After the delivery is completed in August, we will set up a dedicated team to do export (business)." Lin Mingjun told reporters, "Currently, Punk Auto has exported several cars to some countries for preliminary work such as 3C certification and various safety factor standards. There are also some orders under negotiation and agreements are about to be signed. The entire business line of Punk Export is operating healthily."
Weima's export resources are also valued by Happy Automobile. On July 25th, Weima Motors posted an article on Weibo stating that it was "ready for shipment", and the accompanying picture shows the scene of Weima EX5 going out to sea for shipment. Shen Hui forwarded and said, "Let's go and see the sea together."
Happy Automobile, also known as WM, has a management team with rich international management experience and has made significant breakthroughs in overseas expansion in 2023. It has specifically promoted diversified cooperation projects in the European Union, the Middle East, ASEAN, North America and other regions. Some models of Weima Motors have also taken the lead in obtaining EU WVTA certification and SSTA certification (EX5 model is WVTA, E5 model is SSTA).
"Export is currently a very good business model for China's new energy vehicle manufacturing industry because domestic sales are too competitive," Lin Mingjun said bluntly. "In our recent communication with Weima, we have found that their business plan is more reflected in their export resources. Weima has an export team. The profit from exports is higher than that of domestic sales, and export is a very worthwhile business model to try."
The reporter learned that in addition to export business, Happy Automobile will also make efforts in the field of intelligent vehicles. "AI cars are an important direction for the development of Happy Automobile. We are actively communicating with automotive ecosystem enterprises, including autonomous driving technology enterprises, to see if we can work together to develop cars with AI capabilities based on the current models of Happy Automobile."
Lin Mingjun bluntly said, "Of course, the success of Weima's merger and acquisition is the best, but if the merger is not successful, or if we acquire other companies, we will not change the path of AI automobiles. We have also been carrying out software transformation based on products recently, and it is not ruled out that some well-known third-party enterprises will cooperate with us strategically to accelerate the application of our high-tech, especially AI technology."