On the evening of July 31, Broadcom shares that had been suspended for nearly three months announced a reorganization plan that combines assets replacement and asset purchases. If the restructuring is successful, Shaanxi Automobile Group will implement a backdoor listing.

Affected by this news, Broadcom's resumption of trading on August 1 was buoyed by the market, opening a word limit.

However, the Shaanxi Automobile Group, which is a backdoor of Broadcom, has faced an embarrassing situation: Although Shaanxi Automobile Group owns 17 participating companies, its 80% of its assets and over 90% of its net profit comes from Shaanxi Zhongqi. Due to historical reasons, Shaanxi Automobile Group only holds 49% of Shaheenqi's equity, and the remaining 51% of the controlling stake is owned by Weichai Power. Therefore, there are risks that Shaanxi Automobile Group can not independently control the main investment assets.

As Shaanqi Group has 49% shares in Shaanxi Heavy, Shaanxi Automobile Group becomes a listed company if Shaanxi Automobile Group succeeds in borrowing from Broadcom. However, since Weichai Power also holds the core business of Shaanqi Group, Shaanqi 51%. Shares have absolute control.

In this way, Shaanxi Zhongqi was controlled by two listed companies at the same time, continuing its fate of “a waitress and two husbands”.

Shaanxi Heavy Gas Fails to Fight the Destiny of "One Woman and Two Women"

If this reorganization is successful, it will have an impetus for the future development of Broadcom and Shaanxi Automobile Group.

However, due to historical reasons, Shaanxi Automobile Group only holds 49% of Shahejunk shares, and the remaining 51% of the controlling stake is owned by Weichai Power. Therefore, there are risks that Shaanxi Automobile Group can not independently control the main investment assets.

At the same time, once Shaanqi CNPC has achieved the listing of 49% of its shares through Shaanxi Automobile Group, it means that SAIC Motor's 100% assets are among the listed companies. In the same company composed of two listed companies, there will be more complicated procedures and more disputes of interests in the decision-making of major events. Shaanxi Heavy Gas will continue its fate of “a waitress and husband”.

The reason why Shaanxi Heavy Duty Truck Co., Ltd. could not escape the fate of a female husband is because it plays a decisive role in Shaanxi Automobile Group and Weichai Power, and neither of them will concede equity issues.

Although Shaanxi Automobile Group owns 17 participating companies, its 80% assets come from Shaanxi Zhongqi. Also, in 2011 and 2012, Shaanxi Automobile's investment income from Shaanxi Zhongqi was approximately 99.66% and 91.81% of its parent company's shareholders’ net profit, respectively.

For this reason, in the reorganization plan, Broadcom has placed special emphasis on the risk that the Shaanxi Automobile Group could not independently control the main investment assets after reorganization. If there is any fluctuation in the performance of Shaanxi Heavy Industry, it will also have a significant impact on Shaanxi Automobile's net profit. At the same time, Shaanxi Zhongqi's profit distribution plan and cash dividend level will also directly affect Shaanxi Automobile's cash dividend ability.

For Weichai Power, Shaanxi Heavy-Duty Truck is not only a key link in the strategic layout of its heavy-duty truck industry chain, but also an important source of its revenue. In 2012, 47% of Weichai Power's revenue came from Shaanxi Zhongqi.

Although Weichai is the major shareholder of Shaanxi Automobile Heavy Trucks, Shaanxi Automobile Group, the second largest shareholder of Shaanxi Auto Heavy Truck, still has absolute control over the heavy trucks of Shaanxi Auto, and it is difficult to penetrate the management of human resources and finances.

In recent years, with the heavy truck business of Shaanxi Heavy Duty Truck gradually becoming the core business of Shaanxi Automobile Group, there has been a game between Weichai Power and Shaanxi Automobile Group.

According to previous media reports, in December 2006, under the leadership of the Shaanxi Provincial State-owned Assets Supervision and Administration Commission, Shaanxi Yanchang Petroleum officially took a share in Shaanxi Auto and invested RMB 1 billion in Shaanxi Auto. The chairman of Weichai Power, Tan Xuguang, realized that the HSCSA did not lose the controlling position of Weichai Power after it had followed up with Weichai Power to follow up on the investment.

Although in order to go public, Shaanxi Automobile Group and Weichai Power initially reached a certain degree of agreement. However, because the two sides have no concession on the issue of equity, if the listing is successful, this proportion of the shares will continue to be listed in the listed company.

According to Zhang Zhiyong, an analyst in the automobile industry, under the situation that both Weichai and Shaanxi Automobile are divided in Shaanxi Zhongqi, such as the dilution of shares listed by Shaanxi Automobile Group (the original shareholding of shareholders of Shaanxi Automobile Group was reduced, which provided shares for new investors). With the introduction of strategic investors and other links, all stakeholders will have the selfishness of maximizing their own interests. Therefore, many details are more difficult to coordinate.

Another analyst said that this major asset restructuring is equivalent to the IPO, in order to pass the approval is still difficult. Broadcom shares also stated that one of the risks is the review by the Securities Regulatory Commission, whether relevant approvals or approvals can be obtained, and the timing of final approval and approval is uncertain.

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