Haite Group's related mergers and acquisitions face a "four-year tug-of-war"! The plan keeps changing, and the valuation of the target asset has shrunk by 60%!

As of March this year, Haikong Group has continued to release a monthly announcement on the familiar “restructuring” progress for one and a half years: the major asset restructuring matter is still ongoing, but there are certain obstacles in advancing the transaction, and there is significant uncertainty about whether it can ultimately be implemented.

Since officially announcing the initiation of the affiliated party asset acquisition in May 2022, Haikong Group’s restructuring plan has undergone three significant modifications in nearly four years, the valuation of the target assets has been halved, core terms have shrunk step by step, payment methods have undergone major changes, stability has been lost, and the timeline for the restructuring to materialize has yet to be seen.

As regulatory authorities continue to intensify their crackdown on “deceptive restructurings,” can this restructuring drama, which has gradually fallen into a stalemate, find a way out?

The “war of attrition” in restructuring has begun.

Haikong Group’s main business includes passenger transport, bus station operations, and comprehensive automotive services. It was listed on the Shanghai Stock Exchange in July 2016. In recent years, as the national high-speed rail network rapidly expanded and the number of private cars surged, the demand for medium- and long-distance passenger transport has declined, impacting the company’s main business, which has seen its peak revenue since listing in 2018.

From 2020 to 2024, Haikong Group has reported net losses for five consecutive years, with the latest performance forecast indicating that the company is expected to incur a net loss of 40 million to 80 million yuan in 2025, and a net loss excluding non-recurring items of 48 million to 96 million yuan. Meanwhile, the company’s debt-to-asset ratio has been climbing year after year, reaching 69.17% by the third quarter of 2025.

Faced with the continued slump in its main business, Haikong Group has turned its attention to the duty-free business. In 2020, the construction plan for Hainan Free Trade Port was issued, making the duty-free concept a hot topic in the capital market. In the same year, the actual controller of Haikong Group, the Hainan Provincial State-owned Assets Supervision and Administration Commission, changed its equity contribution in Haikong Holdings to Hainan Travel Investment, which holds the duty-free license, thereby becoming the indirect controlling shareholder of the listed company, currently holding 42.5% indirectly.

The dual expectations of “duty-free + restructuring” quickly ignited the company’s stock price. In August 2020, Haikong Group’s stock price soared to a historic high of 68.22 yuan per share, an increase of over 500% within two months.

In May 2022, Haikong Group officially suspended trading to plan a major asset restructuring, proposing to purchase 100% of the equity of Hainan Travel Duty-Free from its indirect controlling shareholder at a price of 5.002 billion yuan through the issuance of shares and cash, while concurrently raising no more than 1.8 billion yuan in supporting funds.

The favorable news from the restructuring once again boosted the stock price, and with the support of the duty-free concept, Haikong Group’s stock resumed trading with 11 consecutive limit-up days, soaring from 12.02 yuan per share to a peak of 45.78 yuan per share within just one month, an increase of 280%.

However, after the stock price euphoria, Haikong Group’s restructuring plan fell into a prolonged battle of attrition.

Multiple modifications have led to a shrinkage in valuation.

Since the first announcement of the acquisition of Hainan Travel Duty-Free, Haikong Group’s restructuring process has lasted nearly four years, during which the restructuring plan has undergone multiple modifications, several suspensions, and has faced multiple rounds of regulatory inquiries, with its prospects still filled with uncertainty.

In April 2023, Haikong Group first adjusted the transaction plan, reducing the transaction price from 5.002 billion yuan to 4.08 billion yuan, and the amount of supporting fundraising from no more than 1.8 billion yuan to 1.4 billion yuan, but the restructuring was halted due to outdated financial data.

In March 2024, Haikong Group restarted its restructuring plan and announced significant adjustments to the restructuring scheme: the transaction price was further reduced to 2.037 billion yuan, nearly 60% less than the initial valuation; the scale of supporting financing was compressed to 738 million yuan, and performance commitments were significantly reduced. Regarding this plan adjustment, Haikong Group stated that the main reason was that the target company’s performance was below expectations.

However, just six months later, in September 2024, Haikong Group again made significant adjustments to the restructuring plan, changing the original plan of “issuing shares and paying cash to acquire 100% of the equity of Hainan Travel Duty-Free” to “acquiring control of Hainan Travel Duty-Free after divesting the Huating project through cash and/or asset payments.” The new plan eliminated the issuance of shares and the supporting financing arrangements, blurred the equity acquisition ratio, and did not mention key terms such as performance commitments.

Subsequently, Haikong Group has regularly released monthly announcements on the restructuring process, but there has been no substantial progress. The company’s latest announcement indicates, “Due to factors such as intense competition in the domestic duty-free market and slowing consumer demand, it is expected that the performance of the target company, excluding the Huating project, may decline significantly in 2025. There are certain obstacles in advancing this restructuring, and there is significant uncertainty about whether it can ultimately be implemented.”

From “issuing shares + cash acquisition + supporting fundraising” to “cash/assets” acquisition, the acquisition plan has been significantly simplified, which also poses a challenge to the listed company’s payment capability. The third-quarter report for 2025 shows that Haikong Group has cash funds of 281 million yuan, which, compared to the latest valuation of Hainan Travel Duty-Free, indicates a funding gap of over 1.7 billion yuan; on the other hand, the company has interest-bearing liabilities exceeding 1 billion yuan, and the high debt-to-asset ratio further exacerbates financing pressure.

“Based on the current situation, a simplified merger and acquisition process could be completed within three months, while the average duration for a standard process is 6 to 12 months, constituting an average of 12 to 18 months necessary for a restructuring listing, and in particularly complex cases, the acquisition cycle may exceed two years,” Wang Jie, a senior partner at Dacheng Law Firm, told the Securities Times. Haikong Group’s restructuring has already exceeded this timeframe.

Numerous difficulties hinder the restructuring’s realization.

Liu Zhigeng, a researcher at the Suzhou Management Accounting and Auditing Research Institute, stated that prolonged cycles for related mergers and acquisitions usually stem from four main reasons: first, the target’s performance is below expectations; second, the valuation and performance commitments have reached a stalemate; third, regulatory scrutiny is becoming increasingly strict; and fourth, coordinating the interests of the parties involved in the transaction is challenging.

Previously, regulatory authorities conducted multiple rounds of inquiries regarding Haikong Group’s restructuring plan, focusing on key issues such as inflated valuations, sources of funds, and performance commitments. The actual performance of the target assets in the merger has been severely disconnected from expectations, raising market doubts about the existence of a significant “bubble” in its valuation.

In the initial merger proposal in 2022, the valuation of 100% of Hainan Travel Duty-Free was set at 5.002 billion yuan, with an increase rate exceeding 13 times. The plan also promised that the target company’s net profits from 2022 to 2024 would not be less than 116 million yuan, 358 million yuan, and 538 million yuan, respectively. However, in 2021, Hainan Travel Duty-Free reported a net profit attributable to shareholders of -24.4689 million yuan, indicating no profitability.

The high valuation of Hainan Travel Duty-Free is based on the listed company’s optimistic expectations for its growth. About 80% of Hainan Travel Duty-Free’s revenue comes from offshore duty-free business, with the Hainan Travel Duty-Free City, established in December 2020, serving as its core business platform. The listed company initially predicted that the annual growth rate of Hainan Travel Duty-Free’s duty-free business revenue would exceed 50% in 2022 and 2023.

However, in reality, starting from 2022, Hainan Province’s offshore duty-free sales, after experiencing explosive growth for two years, faced significant adjustments, compounded by increasingly fierce market competition, leading to Hainan Travel Duty-Free’s performance falling far short of expectations. In 2022 and 2023, its net profit attributable to shareholders was only 61 million yuan and 139 million yuan, completing only 52.58% and 38.83% of the performance commitment value, respectively. According to company disclosures, the target company’s performance is expected to decline further in 2024 and 2025.

At the corporate governance level, since the restructuring began, Haikong Group’s core management team has frequently changed. In January 2024, former chairman Liu Hairong resigned due to a job transfer, and in June 2025, his successor, chairman Feng Xianyang, also resigned, with Fu Ren’en taking over as chairman. In November 2025, general manager Ma Chao resigned and no longer holds any position in the company, with the general manager position temporarily held by Fu Ren’en. The frequent turmoil at the top level inevitably affects the continuity of restructuring decisions.

“Haikong Group has made numerous significant adjustments to the restructuring plan during the acquisition of Hainan Travel Duty-Free, reflecting that the core foundation of the transaction has been shaken, which is a passive compromise by the listed company under poor target performance, industry downturn, and regulatory pressure, rather than an active optimization of the plan. Essentially, it is a shift from ‘strategic upgrade’ to ‘loss mitigation and survival,’” Liu Zhigeng analyzed.

Regarding the obstacles to restructuring progress, the basis for plan adjustments, and funding gaps, the reporter sought an interview with Haikong Group, but had not received a response by the time of publication.

The risk of “difficult mergers and acquisitions” must be taken seriously.

Since the implementation of the “Six Guidelines for Mergers and Acquisitions,” the restructuring review process for A-shares has continued to improve, significantly enhancing the efficiency of mergers and acquisitions for listed companies. The reporter’s statistics show that since 2025, the average time from the first disclosure to the completion of major asset restructurings initiated by listed companies as buyers is 334 days, with the shortest taking less than two months and the longest approximately two years.

In contrast, Haikong Group’s restructuring process has dragged on for an extended period, with multiple modifications to the core plan, which is far from normal but not an isolated case. Companies with prolonged restructuring cycles often exhibit characteristics such as sluggish main businesses and heightened speculative emotions, with most leading to failed restructurings.

For example, Zhongyida initiated a 10 billion yuan acquisition in May 2021, proposing to acquire 100% of the equity of Wengfu Group. This restructuring plan underwent multiple rounds of regulatory inquiries and was terminated in February 2024 after nearly three years.

Liu Zhigeng believes that the prolonged restructuring cycle negatively impacts listed companies in five main ways: first, the listed company misses the window for transformation, resulting in continued weakness in its main business and a failure to establish new businesses; second, investor expectations are repeatedly frustrated, leading to long-term pressure on the stock price and severely weakening fundraising ability; third, the fairness of the transaction is questioned, with significant modifications and concessions to core transaction terms raising market speculation about whether asset pricing is fair and whether there are benefits being transferred; fourth, the efficiency of communication with regulators is low, exposing shortcomings in corporate governance capabilities; fifth, the continuous devaluation of the target assets may ultimately lead to “negative assets” being injected into the listed company, further increasing its financial burden and facing “takeover” risks.

Wang Jie stated that multiple significant adjustments to the restructuring plan are not entirely negative, but high frequency and large magnitude usually indicate insufficient prior validation, intense negotiation, or the presence of biased interests. In his view, frequent adjustments will inherently lengthen the cycle, amplify uncertainty, and weaken market trust, ultimately significantly increasing the failure rate of restructurings and compliance risks, long-term harming the value of listed companies and the rights of small and medium shareholders. “Regulators and the market should focus on distinguishing whether it is a compliance adjustment or a capricious change; whether it is to protect the listed company or to favor specific parties.”

“To determine whether a plan is a genuine adjustment or a ‘deceptive restructuring,’ one should look at whether the direction of the plan adjustments converges or diverges. Genuine restructuring modifications usually involve narrowing the scope of the targets, making pricing more reasonable, and rectifying compliance flaws, leading to a convergence of the final plan, while ‘deceptive restructuring’ plans become increasingly chaotic, with fluctuating target sizes, repeated valuation jumps, inconsistent performance commitments, and frequent overturning of transaction structures. Each announcement claims ‘significant adjustments,’ yet key issues are never resolved,” Wang Jie said.