Priced at 700 million! Huakai Yibai is going to acquire Tongtuo

Huakai Yibai’s acquisition of Tongtuo Technology, the latest progress!

In December 2023, Huakai Yibai claimed that it planned to acquire 100% of Tongtuo Technology's equity and all operating assets related to its main business in cash.

On the evening of May 21, Huakai Yibai issued a new announcement on the signing of the "Equity Acquisition Agreement", indicating that it will acquire Tongtuo Technology for 700 million in cash.

This wave of big-selling alliances is rare in the cross-border circle, and is currently called a typical case of "1+1>2" by many industry insiders.

Priced at 700 million! Huakai Yibai intends to acquire 100% equity of Tongtuo Technology

The latest news shows that Huakai Yibai intends to purchase 100.00% of Tongtuo Technology's equity by paying cash . Before this transaction, the company did not hold any equity in Tongtuo; after the completion of this transaction, Tongtuo will become a wholly-owned subsidiary of the company, and the company will directly hold 100.00% of Tongtuo's equity and all operating assets related to its main business (including but not limited to trademarks, patents, stores, inventory assets, etc.).

The asset-based method is the final valuation result of the target assets of this transaction. As of the valuation base date, the valuation of 100% equity of Tongtuo Technology is RMB 769,023,400. Based on the valuation results and the RMB 70 million dividend of Tongtuo Technology after the valuation base date, it was determined through negotiation among the parties to the transaction that the transaction consideration that Huakai Yibai needs to pay for the proposed purchase of 100.00% equity of Tongtuo Technology is RMB 700 million.

In short, Huakai Yibai will acquire 100% of Tongtuo Technology's equity for 700 million yuan in cash .

(The picture shows the payment process of 700 million yuan in cash)

After Huakai Yibai pays the relevant amount, Tongtuo Technology shall hand over all of Tongtuo Technology's documents, seals, other documents held by Tongtuo Technology, originals of qualifications and certificates, account passwords of the online platform stores actually controlled, and other assets of the online platform stores actually controlled to the personnel designated by the company, and Huading Holdings and Tongtuo Technology shall complete the comprehensive transfer of Tongtuo Technology's personnel and property.

It is worth noting that since this transaction does not involve the issuance of shares by the listed company, it will not affect the equity structure of Huakai Yibai.

In the view of Huakai Yibai and Tongtuo Technology, this reorganization will undoubtedly bring about a win-win situation.

1. It will help the company focus on its main business, take advantage of the golden development period to expand its business scale, and enhance its comprehensive competitiveness and industry status. After the transaction is completed, the listed company will make full use of the policy dividend period and the golden development period to further expand its business scale, especially to strengthen its layout in emerging markets and key regions encouraged by policies, deeply tap market potential, increase market share, enrich product categories and expand business areas, and significantly enhance its comprehensive competitiveness and industry status.

2. This transaction is conducive to the complementary advantages and deep integration between the Company and the target company, giving full play to the synergy effect and improving the global layout. First, category complementarity and warehousing optimization. While enriching the product lines, both parties will improve the overseas warehousing and logistics layout, expand global distribution coverage, and improve the regional accessibility and response speed of goods; second, supply chain integration and cost control. The two parties will share each other's supply chain resources and channel networks, carry out joint procurement, and effectively reduce the procurement cost of a single item; third, information empowerment and operation upgrades. The listed company will use its own advanced information system to help the target company realize the automation and intelligent transformation of its operation process.

Huakai Yibai’s cross-border ambitions

Yibai Network and Tongtuo Technology are both major cross-border e-commerce companies in Shenzhen. Both started out by distributing goods in their early years. However, driven by the tide of the times, the two companies ended up with different outcomes, the most direct manifestation of which is the difference in revenue and profit.

Tongtuo Technology mainly deals in dozens of categories including 3C electronics, photography and audio-visual, home and outdoor, instruments and tools, model toys, beauty and clothing, health management, and auto parts. Affected by factors such as the severe blow of Amazon's account ban, Tongtuo Technology has not yet "escaped the quagmire" for the time being.

From 2022 to 2023, the number of third-party e-commerce platform sites of Tongtuo Technology will be 9,086 and 10,856 respectively, mainly concentrated on Amazon, AliExpress, Meikeduo, eBay, Shopee and other platforms. The cross-border e-commerce retail business revenue of Tongtuo Technology was RMB 342,463.13 million and RMB 339,482.71 million respectively, accounting for 99.35% and 99.47% of the operating income respectively; other business income (income from providing logistics agency services to other companies) was RMB 22,464.9 million and RMB 18,179.1 million respectively, accounting for less than 1% of the operating income.

"Looking at sales volume alone, it is more ferocious than a tiger, and looking at the profit of 0.25 cents" can be said to be a true portrayal of Tongtuo at present. It is understood that in 2022 and 2023, Tongtuo's net profit attributable to the parent company's owners after deducting non-recurring gains and losses was -340.9416 million yuan and -106.6179 million yuan respectively, both of which were in a loss state .

(Tongtuo Technology's main business income is classified according to e-commerce platforms)

In recent years, Yibai Network has been developing more and more vigorously. In 2024, it has set a goal of 8.5 billion yuan in operating income for its cross-border export e-commerce business segment . Considering the revenue in 2023, this goal is not too high.

In 2023, Huakai Yibai achieved operating income of 651,786.06 million yuan and net profit attributable to the parent company's owners of 33,216.15 million yuan, of which its wholly-owned subsidiary Yibai Network achieved operating income of 648,348.18 million yuan, a year-on-year increase of 47.89%; and net profit of 40,583.28 million yuan, a year-on-year increase of 40.62%. So far, Yibai Network has achieved its performance commitments for five consecutive years .

In 2023, Yibai Network continued to exert its strength on the Amazon platform, achieving sales in 785 online stores, with 86 new stores and 9 closures during the period. Sales revenue reached 487,577.69 million yuan, accounting for 74.81% of operating income, and the total number of Amazon orders was 35.1009 million, with an average order amount of 138.91 yuan.

It can be said that Shenzhen's cross-border e-commerce giant Yibai Network has almost supported all of Huakai Yibai's revenue. Huakai Yibai has long since stripped off its early identity of mainly providing comprehensive environmental art design services for large indoor spaces such as exhibition halls and exhibition halls , and with the support of its subsidiary Yibai Network, it has completely transformed into a cross-border e-commerce export giant.

Judging from the revenue situation, the statement that "Huakai Yibai acquired Tongtuo for 700 million cash" is seen as a combination of a strong dragon and a fierce tiger, but it is being questioned by many people. Many industry insiders are more inclined to another interpretation: Tongtuo can indeed use this acquisition opportunity to get out of the quagmire, and Huakai Yibai can gain greater benefits from it and realize greater ambitions .

At the beginning of this year, Huakai Yibai officially announced that it would spend 1.5 billion to build its South China headquarters. The future South China headquarters will include design and R&D offices, IT technology centers, core product production and assembly lines, smart warehousing, product experiments, testing, and inspection rooms, and other supporting facilities.

Huakai Yibai aims to build a large-scale, clustered, innovative, and branded cross-border export e-commerce industry demonstration base with independent intellectual property rights, advanced technology, and a certain scale.

Combined with Huakai Yibai's large-scale acquisition of Tongtuo, its optimism about cross-border e-commerce is clearly reflected on its face, or in other words, Huakai Yibai fully believes that it can make a bigger mark in the cross-border circle in the future.

Huakai Yibai

Tongtuo