Songcheng Performance Development Co., Ltd (‘Songcheng Performance’ or the ‘Listed Company’) acquired 100% equity interests held by the relevant shareholders in 6.cn Inc. (‘6.cn’ or the ‘Target Company’) and the total consideration therefore was the payment of RMB 2.6 billion made through share issuance and in cash (the ‘Restructuring’). In March 2015, the parties duly executed the Issuance of Shares for Purchase of Assets and other transaction agreements with respect to the Restructuring; in July 2015, the Restructuring was approved by the CSRC and the sales and purchases of underlying assets closed at the end of July 2015; in September 2015, the capital financings and the listing of new shares on the ChiNext market of the Shenzhen Stock Exchange were completed.
The Target Company was originally a variable interest entity under the control of TaiYangZhuang Technology (Beijing) Co., Ltd. (TYZ Beijing) pursuant to a series of control agreements. The Restructuring was carried out by the following steps: firstly, the Listed Company will acquire, through its controlling shareholder Songcheng Group, 100% equity interests in TYZ Beijing and 62% equity interests in 6.cn, respectively; after completing the first step of the transaction as described above, the Listed Company will purchase 100% equity interests held by Songcheng Group and the management of the Target Company in 6.cn with the payment made in cash and by issuing shares, and raise the supporting funds.
In the second step of the Restructuring, the management of the Target Company held 38% equity interests in 6.cn in the aggregate, for which the consideration was valued at RMB 988 million and was paid by the Listed Company through share issuance; and the 62% equity interests held by Songcheng Group (an affiliate of the Listed Company) in 6.cn was valued at RMB 1.614 billion, which was paid in cash by the Listed Company to Songcheng Group. The cash consideration of up to RMB 650 million was raised by the Listed Company via supporting funds, and the remaining cash consideration was raised via other funds internally generated by the Listed Company.
According to monthly data collected about active users in 2014, 6.cn is currently the largest internet performing platform in China. Upon the completion of the Restructuring, it is expected that 6.cn will speed up its development and further grow its market presence on the basis of the listing platform provided by Songcheng Performance, so as to improve Songcheng Performance’s competitive position in the internet performance sector.
The JunHe team, acting as counsel for the restructured company, advised on the compliance and feasibility of the two-step transaction scheme of the Restructuring. Based on the scheme,, the JunHe team represented the client in multiple negotiations with the Listed Company and finally helped the client reach agreement with the Listed Company in respect of the dismantling of the VIE structure, the scheme of the issuance of shares for the purchase of assets and the subsequent performance undertaking and compensation mechanism, making its contributions to the obtainment of CSRC’s approval for the restructuring scheme. In addition, the JunHe team was recognized by the client for its professional advice on the possibility of the Restructuring to be identified as a concentration of undertakings and the qualifications of 6.cn required for business operations.
Messrs. YU, Yongqiang (YY) and Chen Guiyang jointly led on this project.