2003: Starting with Foreign Trade

Chapter 977 Another Blitzkrieg

In the afternoon, Zhao Xinyi walked into Tan Jincheng's room with a smile, holding an invitation in her hand.

"Boss, it looks like you'll be staying in Jinling for two days."

The letter was a very formal invitation; the Nanjing Municipal Government invited Tan Jincheng to conduct an investment inspection in Nanjing.

Tan Jincheng took the letter, opened it, and smiled.

"Alright, I'll stay for two days then. I'll also have the company compile a copy of Zhidou's materials so I can get a feel for it."

Tan Jincheng was passing through Nanjing in a private capacity and did not intend to stay for long. However, since this had happened, he decided to stay for a few days.

Jinling's response was quite swift. After making a fool of themselves in the new energy vehicle sector in 2020, they desperately needed a boost.

Tan Jincheng doesn't like Byton, so he can talk to Zhidou.

In fact, Jinling had anticipated that Tan Jincheng would look down on Byton, but they were just taking a chance and didn't have high expectations.

Everyone knows that new energy vehicles are a promising sector, attracting a flood of capital eager to get a piece of the pie.

Burning through billions isn't really a big deal, but Byton's situation is more complicated. If Byton succeeds, then its background will be a huge asset.

However, at this stage, Byton's various backgrounds are a major obstacle to its bankruptcy reorganization process, and no one would be happy to see their investment in Byton being taken advantage of by others.

Moreover, this involves FAW, which urgently needs to prove itself in the new energy vehicle sector, and Tan Jincheng does not want to have any conflict with FAW.

"I've already had them prepare it, it should be sent over in a bit, boss, please wait a moment."

Both giants and companies have professional business investigation departments responsible for the preliminary work of investment and acquisition.

Given the widespread operational difficulties faced by vehicle manufacturers in Jinling, a city not far from Ningbo, how could commercial investigation departments not take notice?

Tan Jincheng's interest in Zhidou, expressed through Zhang Qiang's words, was not a spur-of-the-moment decision. Even without Zhang Qiang, there would have been Liu Qiang or Wang Qiang.

Founded in 2006, Zhidou, one of the earliest new energy vehicle companies in China, peaked between 2015 and 2017, but began to decline rapidly in 2018.

His growth and development trajectory is almost a history of subsidies for new energy vehicles in China, rising because of subsidies and falling because of subsidies.

In fact, in 2018, with the phasing out of new energy subsidies, quite a few companies like Zhidou quickly collapsed.

Brands like Wuling Motors, a national icon, JAC Motors, and BAIC and Chery, which initially focused on the A00 segment, all faced difficulties at one point.

Fortunately, these companies have strong brand foundations, solid resources, and major shareholders, which are enough to support them through the difficulties.

"To be honest, if we were to get involved in integrating Zhidou, our advantages would be quite obvious."

Besides Wei Lai's own strength and Tan Jincheng's reputation for handling distressed companies, Zhidou's bankruptcy department is an agency related to Ninghai, Ningbo.

This alone, given the current restrictions on travel, means that Weilai can save a lot on communication costs, at least.

Furthermore, if Weilai Automobile were to take the lead in reorganizing Zhidou, both Nanjing and Ningbo would obviously be happy to see this happen.

The following day, under the guidance of relevant personnel, Tan Jincheng participated in a very formal meeting.

Taking a "handle one case at a time" approach, Jinling temporarily put the Byton matter aside, which was quite embarrassing to admit.

After burning through more than 80 billion yuan, all that Byton has left besides a few concept cars, factories, and land is its brand value.

Aside from the factory buildings and land, Tan Jincheng didn't care about anything else. As for the so-called North American headquarters, he thought it was more of a joke.

Byton never planned to sell in North America. Unless Byton sets up its company in North America like Jia Yueting did, it's impossible for them to sell cars there.

I don't know why Byton's management came up with such a idea; they couldn't possibly be unaware of the current situation.

Zhidou, on the other hand, is facing difficulties mainly due to the decline in new energy policies, resulting in a lack of sales and financial support.

If things go well, Zhidou might be saved.

As one of the earliest new energy companies in China, Zhidou has quite a few core assets, which are obviously valued by Tan Jincheng.

Zhidou currently has four core assets, the first of which is the production qualification that all new energy companies are most concerned about.

Based on the prices paid by companies like WM Motor and Wenjie when they acquired new energy vehicle production qualifications, Zhidou, with its dual qualifications, already possesses considerable value simply because of this.

Secondly, there is its overseas channel layout. Zhidou has a huge market in markets such as native chicken and Colombia.

At its peak, Zhidou was the best-selling electric vehicle brand in Turkey, the second-largest brand in Colombia, and also held a significant market share in South Korea.

The third point is Zhidou's technological accumulation. As a brand company with more than ten years of history and a certain market reputation, Zhidou still has many highlights in the design and production process of micro electric vehicles.

To put it simply, the fact that Zhidou can occupy a certain market share in a mature car consumer market like South Korea proves that it's not just a subsidy-driven company.

Fourthly, and most directly, Zhidou's most direct value lies in its nearly 700-acre production base in Gansu Province.

The 700-acre production base has a complete vehicle production line and professional equipment, including four major processes: stamping, welding, painting and final assembly, and is equipped with normal production and operation conditions.

According to internal assessment data from Weilai, with only a certain amount of investment, the Gansu production base, once production resumes, will have an annual production capacity of 40,000 to 60,000 new energy vehicles.

Of the four core assets, apart from the production qualification which Weilai doesn't care much about, the others are all excellent additions to Weilai's entire automotive ecosystem.

“Participating in the restructuring plan of Zhidou will be able to quickly fill the product gap of Weilai in the field of microcar technology, which is very beneficial to Weilai.”

The success of the Wuling Hongguang MINI EV proves that there is still a huge market demand for low-end electric vehicles. If Zhidou can accurately position itself and upgrade its products, it can seize opportunities in niche markets such as urban short-distance commuting and shared mobility.

The acquiring party has the capability to recreate Zhidou's former glory, as the brand still enjoys considerable popularity in Zhejiang Province.

"There are two options now. The first option is to participate directly in the bankruptcy reorganization process as a reorganization investor and obtain controlling interest in the company through capital injection."

This is similar to Wei Lai's reorganization of Lifan.

The second point is also clear: wait for the restructuring to fail and the company to enter bankruptcy liquidation before acquiring the core assets through asset auctions.

The former has the advantage of being able to retain the company's operating system, workforce, and business relationships more completely, but it needs to take on more debt and historical burdens.

The latter can acquire selective assets at a lower cost, but may lose the value of intangible assets such as production qualifications.

"Let's do it the first way."

With Geely still watching, the second approach, once competition begins, will not actually save much in terms of capital investment compared to the first approach, except for reducing some troubles.

Since we've already gotten involved, we might as well use direct participation to gain favor from all parties and demonstrate Wei Lai's responsible attitude.

In addition, it allows you to get what you want in a better way.

According to Wei Lai's internal assessment of Zhidou's remaining value, Zhidou's four core assets are currently valued at between 600 million and 1 billion yuan.

"Thank you, Mr. Tan, for your support of Zhidou and Jinling. Now let's talk about the possibilities of the first approach."

The joint venture car company with BMW, Bafang Electric and Huanghai Bus, as well as Jinshidai Power Battery and Energy Storage Production Base in Liyang.

Speaking only of these large projects, Tan Jincheng has made a lot of investments in Jiangsu Province, but he has not made any investments in Nanjing.

The Jinling side was pleasantly surprised by Tan Jincheng's decisiveness and knew his personality quite well, so they didn't exchange any pleasantries and went straight to the point.

They are very happy about this collaboration. Once Wei gets involved, there is not only a possibility of reviving Zhidou, but also the ability to establish a connection with the current leader in the new energy industry, allowing Jinling to turn the tide in the new energy race.

Whether from the perspective of their future or the city's image, they can't afford to lose anymore; every city wants to replicate Luzhou's model.

But investing is never easy; in Luzhou, playing all-in poker almost always involves betting the city and one's own future.

Other cities that have achieved similar success as Luzhou are few and far between, but it's truly rare to see a city as unlucky as Nanjing, where four new energy vehicle companies face the risk of bankruptcy in a single year. It's simply unbelievable.

Seeing that Tan Jincheng had no further comment, the Jinling side began to introduce several possibilities.

"The first step is to replace Jinling Zhidou as the main restructuring party, but it must commit to investing no less than the originally planned 3.8 million yuan in special restructuring funds and assume the obligation to repay hundreds of millions of yuan in cash in the future."

Tan Jincheng nodded: "That's how it should be. Weilai is a responsible company and a company that is truly committed to the new energy vehicle industry. Our attitude is to do practical things."

Although Tan Jincheng has a reputation for being shady in business circles, he has never actually done anything like getting something for nothing.

He has never once defrauded companies or local governments of their assets or subsidies under the guise of investment or mergers and acquisitions.

Some money is easy to earn, but it shouldn't be earned. In short, what goes around comes around.

"The second option is to form a joint investment capital with Jinling Zhidou to share the restructuring costs and future profits."

"Thirdly, as a secondary investor, one can subscribe to the debt-to-equity conversion portion of Zhidou and indirectly hold shares in the restructured company."

Jinling Zhidou is the main entity responsible for Zhidou Auto's restructuring, but it is worth noting that they also lack the capacity to fully pay the restructuring investment.

By contributing 380 million yuan and committing to subsequent cash debt, one can acquire core assets worth at least 600 million yuan. This restructuring method is quite favorable for the restructuring party.

The first approach was not feasible for Jinling Zhidou in 2020.

No matter what, it all comes down to a lack of money. If they had money, Jinling Zhidou would be running its own business and wouldn't need to bring in new investment institutions.

Three possibilities were mentioned, and Jinling was now waiting for Tan Jincheng to make a decision, as he was the highest decision-maker and everyone knew how efficient Tan Jincheng was.

Therefore, Tan Jincheng's attitude was crucial for both Jinling Zhidou and Jinling authorities at this meeting. After only a brief moment of contemplation, Tan Jincheng gave them the answer they wanted.

"Let's choose the second option. That way, our financial pressure will be less, and it'll be a win-win situation. What do you think?"

As soon as he finished speaking, everyone in the conference room burst into laughter. Bao Wenguang, the founder of Zhidou, the current general manager of Zhidou Auto, and also the representative of the restructuring party, couldn't hide his smile.

As the actual operator, Bao Wenguang is more aware than anyone of the problems facing Zhidou. Zhidou cannot be solved by funding alone, but that does not mean that Zhidou is beyond saving.

On the contrary, there is still a lot of room for improvement for Zhidou. At least from the assessment, Zhidou is far superior to Lifan.

Aside from lacking a publicly listed financing platform, Zhidou has a complete industrial chain. Although it may not be very advanced, it is at least well-developed and currently maintains a certain operating rate.

With Weilai, which has advantages in new energy, and its founder Tan Jincheng willing to get involved, it couldn't be better for Zhidou.

However, both Jinling and Zhidou were afraid that Tan Jincheng would try to take over everything. If he proposed to take over completely, they would really have no room for negotiation.

This was especially true for Bao Wenguang.

Since Tan Jincheng chose not to monopolize the profits, the subsequent negotiations became much easier. In return, Jinling offered to let Tan Jincheng enjoy 70% of the profits.

As the introducer with absolute control, Tan Jincheng's decision to participate in the restructuring must be because he values ​​Zhidou's equity, and it is inevitable that the other party will gain complete control.

Return the peach.

The so-called bankruptcy reorganization is essentially a distribution of spoils. To complete it smoothly, it is best to avoid taking all the spoils for yourself. Tan Jincheng, who has had many experiences with this, naturally understands this.

The bankruptcy reorganization of Zhidou involves a game of interests among multiple parties. The court and the administrator need to ensure that the reorganization plan is legal, compliant and smoothly implemented.

On the creditor side, it is necessary to persuade them to accept a partial debt-to-equity swap or a discounted settlement plan. On the local government side, both Gansu Province and Ningbo City have a strong motivation to focus on the overall results.

In addition, employees need to be properly resettled to avoid production disruptions, and suppliers need to have their credit rebuilt to restore the supply chain.

Understanding the core demands of all parties and balancing them within the restructuring plan to create a favorable environment for subsequent operations is what the acquiring party needs to address.

“We can handle the situation in Ningbo, and I believe there shouldn’t be any problems. We can also handle the supply chain issue, as Weilai has a good reputation in the supply chain system.”

"As for the creditors, we hope Mr. Bao will play the villain this time. What do you think?"

After finalizing the plan, Tan Jincheng began discussing the specific cooperation details with Bao Wenguang, who was born in 1970 and came from a military background.

The overall style is quite capable. Since they are both from Zhejiang Province and have the connection through Zhongtai, Tan Jincheng is quite familiar with him, so there is no need for formalities.

In a way, Bao Wenguang and Tan Jincheng have similar entrepreneurial approaches. Before getting into new energy vehicles, Bao manufactured motorcycles, while Tan Jincheng was involved in electric vehicles. They are pretty much the same.

“Okay, no problem. I’ll handle the creditors and the situation in Gansu Province. I’ll be the bad guy. As for the employees, we’re not worried at all.”

They're all old acquaintances; they know each other's styles and such, and Lao Bao is no slouch either.

Whether it's debt-to-equity swaps or discounted settlements, persuading creditors isn't difficult. As long as you present a plan and genuinely offer money, you don't need to worry about creditors disagreeing.

"In addition, during the restructuring process, I plan to adopt a two-tier transaction structure design to solve the problems of Zhidou."

The problem with Zhidou is not about acquisitions and restructuring, nor is it about money; it's about its business model.

"A holding company plus business companies, with a special purpose company set up at the top as the acquisition entity, used to raise funds and hold Zhidou shares."

“We’ll set up a business management company at the middle layer to be responsible for Zhidou’s daily operations, while retaining Zhidou’s original legal entity at the bottom layer to maintain the continuity of production qualifications and business contracts. What do you think, Mr. Bao?”

This is roughly the structure of the companies under Tan Jincheng.

In addition to risk isolation and tax optimization, the combination of controlling shareholder and business company can minimize the interference of controlling shareholder in business company.

In the operation of the company, in a sense, there is a conflict of interest between the controlling shareholder and the business company.

Bao Wenguang laughed and said, "Wei Lai also has a FlashDrive mode? No problem, this mode is pretty good."

Tan Jincheng also smiled: "Speaking of Flashpoint, I plan to introduce Flashpoint Technology into this acquisition as well, which is based on Zhidou's specific business."

Zhidou's peak was actually due to its heavy reliance on policy guidance and the benefits it received from policies. However, while policies are important for consumer products targeting end consumers, a high degree of dependence on them is definitely not advisable.

To survive in the market, one must not only rely on policies but also break free from them, rebuild a new brand image, and construct new channels.

"Does Mr. Tan want to leverage Flash's distribution channels? That is indeed a good suggestion."

"That's right. No matter how you call them high-end, micro electric vehicles are actually doing low-end business. Combining them with the channels of two-wheeled electric vehicles is a pretty good choice."

FlashChi is acquiring LeiChi, and the China Securities Regulatory Commission (CSRC) has given its approval in principle, so there shouldn't be any major issues with the acquisition.

If we participate in the acquisition of Zhidou, in addition to strengthening Shanchi's market position, we can also establish a certain connection with Weilai.

Tan Jincheng's bluntness made Bao Wenguang smile wryly. Indeed, no matter how much they boast, A00-class cars in China are still synonymous with low-end.

Using FlashCar's channels to sell cars is indeed a good option.

Besides, whether it's Weilai or Shanchi, they are both Tan Jincheng's companies. He can get either of them involved with just a word.

"No problem, I agree with President Tan's arrangement."

Bao Wenguang finally understood that Tan Jincheng knew far more about Zhidou than he had imagined, and it was clear that he had been eyeing it for more than just the first day.

Upon closer examination, it makes perfect sense. This young man, with his extensive experience in the investment field, has built his company into a powerful and successful enterprise through investment and mergers and acquisitions.

To outsiders, Weilai initially appeared to be a mini Great Wall or a mini BYD, but within the capital circles, Weilai's initial design was actually modeled after Geely.

While maintaining its own brand, the company enriches its product line and increases its technological reserves and market influence through various mergers and acquisitions.

Today, Weilai has quite a few brands under its umbrella, including the main brand Weilai, Yuechi, the pickup truck brand Yangzi, the off-road vehicle brand Tank, and the Xingtu sub-brand which is currently under construction.

The acquisitions included Lotus, Proton, the globally licensed Celing sports car brand, and the commercial vehicle brand Huanghai Bus.

The overall product line covers mainstream passenger vehicles such as SUVs (including off-road vehicles), sedans, sports cars, and pickup trucks.

In addition to the rapidly growing commercial vehicle market this year, Weilai, which was established later than Zhidou, already has a fairly rich product portfolio.

In the automotive industry alone, Weilai has already built its own competitive advantage.

Through this restructuring and cooperation, Bao Wenguang also understands that Zhidou is clearly also a link in Weilai's moat of car models.

"Ambition grows little by little."

After reaching a preliminary restructuring agreement with Bao Wenguang and Jinling, Tan Jincheng, who had returned to Ningbo, immediately summoned Zhang Xupeng.

In the study of the villa, Zhang Xupeng marveled at his old friend's extravagant move, realizing that their initial business plan was quite different.

Even for Wei Lai's initial design, it was merely to sell only a few models, just like Tesla.

However, just as Tesla has been investing and acquiring companies all over the world, if it wants to survive, it must build its own competitive advantage.

To use an e-commerce company as an analogy, Ali boasts a massive user base and a powerful ability to integrate the entire supply chain.

Daqiangzi's strength lies in its speed and logistics system, Pinduoduo in its low prices, while Chengpin Hui's competitive advantage lies in its unique market positioning, high-quality supply chain management, and efficient logistics and after-sales service.

To build its own moat, Wei Lai clearly needs to do more.

From the most basic and cheap electric vehicles for the elderly to two-wheeled and three-wheeled vehicles for regular travel, and then to four-wheeled vehicles for high-end travel, Tan Jincheng has built a comprehensive travel empire that serves all age groups.

"The addition of FlashCenter is indeed a good choice and a complement to FlashCenter's business."

Essentially, Zhang Xupeng doesn't really like investing, but with such a great opportunity for business growth this year, FlashDrive has made a lot of money, so he naturally won't refuse a good opportunity.

The acquisition of Leichi is an example of this, as is joining the restructuring of Zhidou. In addition, traditional peers in the two-wheeled electric vehicle industry are currently getting involved in the new energy vehicle industry in various ways, which is both a trend and a way to supplement the industry.

On August 25, 2020, a company called Yongcheng Zhixing Enterprise Management Consulting Partnership (Limited Partnership) officially completed its controlling stake in Jinling Zhidou through capital injection.

As the controlling shareholder, Yongcheng Zhixing holds 84.21% of the shares in Jinling Zhidou, making it the absolute controlling party and participating in the overall restructuring plan of Zhidou.

The shareholders of Yongcheng Zhixing include Weilai Technology, Shanchi Technology, Yongcheng City Investment, Jinling City Investment, Gansu Provincial City Investment, and Bao Wenguang, the founder of Zhidou.

The respective shareholdings of each company are 36.15%, 36.15%, 10.15%, 9.27%, 7.56%, and 0.72%.

Tan Jincheng holds 72.3% of Yongcheng Zhixing through two companies. Considering that Yongcheng Chengtou is also considered one of his own, Tan Jincheng has absolute control over Yongcheng Zhixing.

Through Yongcheng Zhixing, Tan Jincheng has absolute control over Jinling Zhidou and even the entire Zhidou Motors.

In less than a month, the restructuring framework was officially established, which was another precise blitzkrieg for Tan Jincheng.

"This kid, money makes things easy."

Shufu was somewhat frustrated, having been thwarted by Tan Jincheng once again.

For Ying Jianren of Zhongtai, the situation was equally complex.

At this moment, he was sitting opposite Tan Jincheng.

(End of this chapter)