DEALS
Zhong Lun Assists GENRTEC with Its Investment in the Reorganization of Kunming Machine Tool
Zhong Lun Assists GENRTEC with Its Investment in the Reorganization of Kunming Machine Tool
Release time：2023-03-28
Voice Announcements
On March 24, 2023, GENRTEC Kunming Machine Tool Co., Ltd. (“Kunming Machine Tool", 400068) announced that China General Technology (Group) Holding, Ltd. (“GENRTEC") acquired a 77.14% share in Kunming Machine Tool, which made GENRTEC the largest and controlling shareholder of Kunming Machine Tool. With Zhong Lun’s assistance, GENRTEC successfully invested in the reorganization of Kunming Machine Tool, marking another significant milestone in Zhong Lun’s streak of success in providing reorganization/restructuring services for investors.
Kunming Machine Tool was formerly known as the Central Machine Tool Factory founded in 1939, which was a time-honored brand in the machine tool industry in Yunnan Province. In recent years, Kunming Machine Tool has found itself caught up in a crisis and had to get delisted from the Shanghai Stock Exchange and the Stock Exchange of Hong Kong. The reorganization of Kunming Machine Tool, with the delisting of both its A-shares and H-shares, is the first of its kind in China. Taking into account the difference in the delisting rules between the Chinese mainland and Hong Kong and the needs for capital operation at a later stage, Kunming Machine Tool adopted a groundbreaking approach in its investors’ equity adjustment plan, or in more specific terms, it cleared off and deregistered existing H-shares while issuing equivalent additional A-shares to compensate the holders of H-shares with cash from the disposal of such A-shares. The arrangement creatively solved the problem of “zombie stock" that the delisting of H-shares entailed, thus safeguarding the legitimate rights and interests of the shareholders of H-shares. Moreover, such arrangement was also recognized by the regulatory authorities in both the Chinese mainland and Hong Kong and opens up a new path for the disposal of H-shares after delisting.
Zhong Lun has provided the investor with whole process legal services, including conducting due diligence, designing an investment plan, solving longstanding unaddressed issues, negotiating the investment agreement and plan and seeing through the closing of the reorganization, which enabled the investor to achieve the goal of a “Clean Reorganization". The reorganization not only relieves Kunming Machine Tool from its heavy burden of debt, but also straightens out its capital structure and corporate governance.
The Zhong Lun team for this deal was led by partner Bing WANG and supported by partners Haitao WEI, Rachel LI and Frederick HUI and non-equity partner Haiyang ZHAO. Team members also included associates Beibei ZHANG, Junlin PU, Zhijian Dong, Yuqian MIAO, Cheng GUO, Haoran CHENG, Erchuan LI, Siyi CHEN, Chuyue LIN, etc.
