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LeTV Sports wants to take over the Chinese sports industry for RMB 3.3 billion. Is this a good move?

On February 9, 2017, China Sports Industry announced in the evening announcement that the current major shareholder, the Sports Fund Management Center of the State Sports General Administration, has publicly solicited four intended transferees. Among them, Tianjin Leti Anhong Sports Culture Development Co., Ltd. is particularly noteworthy because it is a subsidiary of LeTV Sports.

LeTV Sports, which has been in a "money shortage" since the end of 2016, is now using subsidiaries to move closer to the largest joint-stock enterprise in China's sports industry. Is it possible to win despite danger?

The past and present life of China Sports Industry, the largest joint-stock company in China's sports industry

China Sports Industry was established in March 1998. It is the largest joint-stock company in China's sports industry. It is also the only listed company controlled by the State Sports General Administration.

▼List of shareholders of China Sports Industry

In the shareholder structure of China Sports Industry as of the third quarter of 2016, in addition to the Sports Fund Management Center of the State Sports General Administration being the largest shareholder, The Sports Lottery Management Center of the State Sports General Administration, Central Huijin Asset Management Co., Ltd., and Junkang Life Insurance Co., Ltd. are also among the major shareholders, accounting for 3.22%, 3.12%, and 2.37% of the shares respectively.

On December 20, 2016, the Sports Fund Management Center of the State Sports General Administration, the largest shareholder of China Sports Industry, planned to transfer all its shares in the company through public solicitation, namely 186.239981 shares, accounting for the total share capital. 22.0733%. The benchmark pricing is 17.53 yuan/share. On January 4, 2017, the Fund Center received transfer applications and deposits from four intended transferees and initiated due diligence on the intended transferees.

The four intended transferees disclosed in the announcement are: Beijing Xiangming Sports Culture Co., Ltd., Xinliyi Group Co., Ltd., Tianjin Leti Anhong Sports Culture Development Co., Ltd., Shenzhen Pengxing SHIPPING LIMITED. Among them, Tianjin Leti Anhong Sports Culture Development Co., Ltd. is a subsidiary of LeTV Sports, and its executive director is LeTV Sports CEO Lei Zhenjian.

Previously, Tencent, Wanda, and Alibaba have been rumored many times to have intentions and plans to take over.

At present, the business of China Sports Industry covers all major sports, including the development of complex urban sports real estate, the operation management and content provision of sports venues and facilities, the operation management of sports competitions, sports intermediary services, and fitness clubs. Chain operations, sports lottery equipment supply and services, etc. Specific business branches include: China Sports (event operations), China Sports Competition (venue operation and consulting), China Sports Pili (leisure and fitness), China Sports Brokerage (sports brokerage and consulting), China Sports Huaao (ticket agency and Event promotion) and Interda (sports betting equipment). Through the above layout, the company has created a full industry chain of upstream, midstream and downstream sports IP resource realization.

Among them, Zhongao Sports Industry Co., Ltd. is a wholly-owned subsidiary of China Sports Industry. Zhongao Sports specializes in marathons (its main projects include Beijing Marathon and Li-Ning 10km Run), bicycles (Round China International Highway It is famous for its three IPs: cycling race) and golf (PGA Tour China, China Golf Club League). It is the longest and largest professional sports event investment and operation company in China.

As a wholly-owned subsidiary of China Sports Industry, China Sports Competition is the largest cross-regional sports venue facility professional management organization and competition resource service organization in China. The main business includes venue consulting, venue operation management, venue financing and construction, etc.

▼Main domestic venues for China Sports competition services

China Sports Brokerage Management Agency is also affiliated to China Sports Industry Group, and its main business covers athlete brokerage, sports marketing consulting, and Olympic Committee cooperation Project, event and sports activity operation and promotion, urban sports marketing, sports advertising public relations and media cooperation services. The company has the most comprehensive national team and athlete resources in China. While engaging in athlete brokerage business, it also provides sports marketing consulting solutions for well-known domestic and foreign brands and domestic cities. During the Beijing and London Olympic Games, the company provided professional Olympic marketing competition analysis and sponsorship planning services for many domestic and foreign brands, helping Yili, Amway, COFCO, Volkswagen, China Unicom, Arowana and other brands to become Olympic and Chinese sports delegations. Sponsors.

China Sports Huaao is a comprehensive and professional sports service organization focusing on Olympic affairs.

Since its operation in 2003, the company has become the exclusive official ticketing agent of the Chinese Olympic Committee, providing ticket sales and tourism reception services for the Summer and Winter Olympics and other international and domestic comprehensive sports events.

▼Financial overview of China Sports Industry

China Sports Industry acquired Beijing Interda System Technology Co., Ltd. in 2012 and entered the sports lottery industry. Interda's intelligent computer sports lottery sales terminal series products have been expanded to 28 provinces across the country, and it is one of the major suppliers of sports lottery terminal equipment in my country. Since sports lottery terminal updates need to ensure system stability and data traceability, their replaceability is very low. The company has built a strong moat with its extensive sales layout in domestic provinces.

Join powerful forces to improve the business layout of the entire sports industry

Leti Anhong was established in 2013 and was registered in Tianjin. It operates sports brokerage agencies, stadium services, and sports events. Event planning, etc. Further inquiries revealed that the company is a subsidiary of LeTV Sports.

▼Leti Anhong’s investment relationship

Looking at LeTV Sports, it now has a wide range of upstream and downstream layouts in sports-related industries, and currently owns the most complete and largest number of sports event copyrights in China resource. In addition to its main business of live broadcasting of sports events, it also participates in the development of hardware products such as wearable devices, smart sports equipment, and smart cameras, while also expanding into Internet application service areas such as smart venues and boxing O2O. LeTV has taken a stake in Yongle Ticketing, a ticketing company focusing on sports ticketing, and is seeking an Internet lottery license business. In February 2016, it led the B-round financing of Octopus Lottery with US$10 million, betting on the opening of football lottery, hoping that football lottery revenue will become An important channel for LeTV Sports to recover its investment.

From this point of view, LeTV Sports’ layout in the sports industry has a high degree of overlap with the existing layout of China Sports Industry, especially in the fields of sports events, venue construction, and sports betting. Once it successfully acquires a stake in China Sports Industry, LeTV Sports can successfully acquire China Sports Group's high-quality event IP resources in the fields of marathon, cycling and golf. In addition to participating in event live broadcasts, it will also be involved in event operations; and provide LeTV with sports venues and sports lottery services. The two pieces of work lay the foundation.

In addition, it must be mentioned that with the holding of the 2022 Winter Olympics, China Sports Huaao, as the exclusive ticketing agent and reception organization, will help the share transferee deeply intervene in the Winter Olympics ticketing Business; China Sports Brokerage’s existing resources will also be of great help to the future development of LeTV Sports’ brokerage business.

▼If LeTV Sports can enter China Sports Industry, its "ecological" business may improve

In addition, does LeTV Sports really hope to use assets to inject China Sports Industry to achieve listing? In the author's opinion, this possibility should be ruled out. The current P/E ratio of China Sports Industry is 368.4, and the total share capital is 844 million shares. From any angle, the huge size of the medium body cannot be regarded as a good shell resource. LeTV Sports is currently only one of the intended transferees. There are many variables as to how many shares it will ultimately acquire from China Sports Industry and whether it will gain control.

At present, the price before the resumption of trading of China Sports Industry is 23.87 yuan. Judging from the agreed transfer price of 17.53 yuan/share proposed by the Fund Center, the transaction consideration for completing the acquisition of all transferred shares is 3.26 billion yuan. . Even though the current valuation of the sports industry is not low in the A-share market, the valuation of China Sports Industry is much higher than the industry average. From a purely financial perspective, 17.53 yuan is not an absolutely safe price. The strategic purpose of the intended transferee's investment is far greater than the financial purpose.

LeTV’s strong rival—capital market legend Liu Yiqian?

Except LeTV Sports, the basic situation of the other three transferees is as follows:

Xin Liyi The legal person of the Group Co., Ltd. is Liu Yiqian, a legend in China’s capital market. The group was founded in 2000 and is registered in Shanghai. The group's business integrates financial investment, pharmaceutical chemical industry and real estate development.

▼The investment relationship of Xinliyi Group

Liu Yiqian had a deep connection with China Sports Industry. In 2006, Liu Yiqian acquired the legal person shares of China Sports Industry through the Xinliyi Group he controlled and joined the board of directors. As this part of the equity was lifted, Xinliyi reduced its holdings at a high level. By the end of 2007, Xinliyi ranked as the third largest shareholder of China Sports Industry. By continuously reducing his holdings in China Sports Industry and cashing out, Liu Yiqian made a profit of more than 820 million yuan in less than two years, a profit of more than 10 times.

In November 2009, when China Sports Industry was planning a scheduled increase, Liu Yiqian made a comeback with capital and planned to subscribe for 118 million shares in cash to become the second largest shareholder. However, this private increase was eventually canceled for some reason. Liu Yiqian himself also resigned from his position as director of China Sports Industry after two years.

▼Liu Yiqian information picture

Pengxing Shipping was established in 1982. Its legal representative is Qu Chen. Its registered address is Nanshan District, Shenzhen City. Its business scope includes investment and establishment of industries, domestic trade, Advertising business, rental of self-owned houses, water transportation services, etc. The controlling shareholder of Pengxing Shipping is Shenzhen Shipping Group, and the indirect controlling shareholder is Shenzhen Hongli Financial Investment Holdings Co., Ltd.

▼Pengxing Shipping’s investment relationship

Xiangming Sports was established in 2006. The legal representative is Liu Zhiyuan. The company is registered in Beijing. Its main business includes organizing cultural and artistic exchange activities. , conference services, hosting exhibitions and display activities, sports project management, etc. Its former controlling shareholder, the Bund Holdings Group, had many business dealings with the State Sports General Administration.

▼The investment relationship of Xiangming Sports

Although the true identities of the four transferees in Lushan have finally emerged, whether the equity transfer can be successfully completed depends on the ability of each of the four interested parties. There is still uncertainty about how many shares it holds, who the major shareholder will eventually be, and whether LeTV hopes to use China Sports Industry for further capital operations. On the one hand, the intended transferee needs to meet the substantive requirements put forward by the Sports Fund Management Center of the State Sports General Administration; on the other hand, the intended transferee selected by the Fund Center also needs to obtain approval from the State Sports General Administration and the Ministry of Finance and finally complete the shareholding transfer. During the due diligence process, the sponsoring securities firm will focus on the legal person identity of the intended party and whether the transferee "owns high-quality assets that comply with the regulations of the China Securities Regulatory Commission, and the transferee needs to commit to injecting China Sports Industry within a certain period of time.