July 11 (NBD) -- Acquisition in the form of debt assumption is expected to become a new trend as listed companies are suffering a tight cashflow in face of heavy liabilities and liquidation of pledged shares. 

According to incomplete statistics of 21st Century Business Herald, around 83 percent of corporate control transfer cases in June have a common ground that their big shareholders all face crisis relating to share pledging.  

Beijing Kingee Culture Development Co., Ltd. ("Kingee", 002721.SZ) announced Sunday big shareholders of the listed company's controlling shareholder, Shanghai Bikong Longxiang Investment Management Co., Ltd. ("Bikong Longxiang"), will transfer a total of 73.32 percent stake in Bikong Longxiang to HKJ Group at the price of 1 yuan (15 cents). In addition, the Beijing-based buyer will provide 3 billion yuan (452.9 million U.S. dollars) in liquidation support to Bikong Longxiang.

If the deal was completed, HKJ Group would indirectly control Kingee through Bikong Longxiang, which could mean HKJ Group took the controlling right of Kingee at very low cost. 

A source from the M&A area told 21st Century Business Herald Tuesday the transaction is likely conducted in the form of debt assumption. 

Industry insiders explained acquisition based on debt assumption can, on one hand, alleviate the debt pressure of shareholders of listed companies, and on the other land, reduce tax burdens of acquirers. If acquirers could offer further liquidity support, it could help acquirees address issues caused by the capital chain rupture and get back on track.  

 

Email: lansuying@nbd.com.cn

Editor: Lan Suying