The 900 million yuan acquisition previously faced opposition from the board of directors. Xin Dazheng responded to the inquiry letter: the transaction's synergistic effects are achievable.

Each Daily Reporter｜Huang Hai    Each Daily Editor｜Chen Junjie

Independent property management firm Xinda Zheng (SZ002968, share price 11.42 yuan, market cap 2.58B yuan) is stepping up its deployment of IFM (integrated facilities management) and has made the latest progress.

In September last year, Xinda Zheng disclosed its plan to acquire Jiarxin Liheng Facilities Management (Shanghai) Co., Ltd. (hereinafter “Jiarxin Liheng”). After 4 months, on January 23 this year, the company released a restructuring plan proposing to acquire 75.1521% of the equity of Jiarxin Liheng, priced at 917 million yuan in total, through a combination of issuing shares and paying cash.

What deserves attention is that Xinda Zheng itself is facing operating pressure of “increasing revenue without increasing profit.” Data show that from 2022 to 2024, the company’s revenue increased from 2.6B yuan to 3.39B yuan, while net profit fell from 186 million yuan to 114 million yuan. The acquisition of Jiarxin Liheng has also been viewed by the market as a key move for the company to enter the IFM track.

However, because this acquisition plan received dissenting and abstention votes during board deliberations, the deal has attracted regulatory scrutiny.

On the evening of April 2, Xinda Zheng released an announcement, providing a detailed response to the letter of inquiry from the Shenzhen Stock Exchange. It addressed core issues including transaction synergy effects, integration risks, the target’s operating conditions, and the fact that no performance commitments were set. Xinda Zheng emphasized that its main business focuses on public building property in the Southwest region, while the target company Jiarxin Liheng focuses on industrial and commercial customers in the East China region. The two sides are highly complementary in terms of market layout and customer structure.

Xinda Zheng: Highly complementary customer types and business regions between the transaction parties

When the board deliberated the transaction draft on January 23, two directors voted differently: Director Wang Rong of Xinda Zheng cast a dissenting vote, and Independent Director Liang Shunan cast an abstention. Both said they found it difficult to judge the synergy effects of this transaction. The Shenzhen Stock Exchange’s letter of inquiry also listed the feasibility of the synergy effects as the top question.

In its response, Xinda Zheng explained that in terms of customer structure, in 2024 more than 65% of the company’s revenue came from government public-building customers, while in the same period Jiarxin Liheng had more than 83% of its revenue from industrial and commercial customers; the two sides have significant differences in strategic positioning and customer groups. In terms of regional layout, Xinda Zheng’s business mainstay is in the Southwest region, where in 2024 the income share of that region was 53.87%. Jiarxin Liheng, by contrast, centers on the East China region, with an income share of 55.65%, and it also has business plans in Hong Kong.

Xinda Zheng believes that the two sides’ high complementarity in customers and regions is conducive to mutually introducing business resources and exploring new growth opportunities. After the transaction is completed, the listed company will absorb Jiarxin Liheng’s capabilities in industry-customized services, green energy management, and other areas, further improving its level of professional services in the IFM field.

“There are differences between the listed company and the target company in the types of target customers and the distribution of business regions. Through this transaction, both sides will be able to introduce business opportunities that fit the brand tracks of each party. At the same time, through this transaction, both sides will strengthen business capabilities in different fields and improve management efficiency, thereby serving existing customers more effectively. The synergy effects of this transaction are feasible.” Xinda Zheng said.

Regarding the integration and control issues that regulators are concerned about, Xinda Zheng disclosed that after the transaction is completed, the company will achieve control through such means as dispatching two-thirds or more of the seats to the target’s board of directors and appointing the chair of the board. At the same time, it will incorporate Jiarxin Liheng into the group’s financial internal control system, promoting deep integration in areas such as personnel, business, and organizational structure, and reducing integration risks.

The target’s gross margin continues to decline; attention drawn by the absence of performance commitments

Financial data show that during the reporting period, Jiarxin Liheng’s operating revenue of the main business maintained growth. In 2023 and 2024, it achieved 2.84B yuan and 2.98B yuan, respectively, and in the first 8 months of 2025 it achieved 2.03B yuan. After excluding the impact of share-based payment expenses, net profits for the same periods were 105 million yuan, 117 million yuan, and 79.09 million yuan, respectively.

Worth noting is that during the aforementioned periods, Jiarxin Liheng’s gross margin continued to decline, at 13.11%, 12.70%, and 11.62%, respectively. Xinda Zheng explained that the decline in gross margin was mainly due to factors such as intensified industry competition and the yearly rise in rigid labor costs.

Another market focus is that this major acquisition of 917 million yuan did not set performance commitments. In response, Xinda Zheng said that the counterparty in this transaction is not the listed company’s controlling shareholder or an associated party, and the transaction does not lead to a change in the company’s control. The two sides may, based on market-oriented principles, independently negotiate whether to set performance compensation; the relevant arrangements comply with the provisions of the “Administrative Measures for Major Asset Restructurings of Listed Companies.”

As an alternative safeguard measure, the transaction plan includes a share lock-up period and non-compete restrictions.

The announcement shows that the share lock-up period for some employee shareholding platforms, as counterparties to the transaction, can be up to 36 months. The natural person partners in the aforementioned shareholding platforms are mostly core employees of the target company, and they need to sign non-compete restriction agreements. Their obligations cover the period during which they hold equity in the target, and also 2 years after they no longer hold shares.

Xinda Zheng believes that the above arrangements can deeply link the interests of the core team with the listed company’s long-term value, which is conducive to safeguarding the rights and interests of the listed company and its minority investors.

Cover image source: Each Daily Media Resources Library

For massive information and precise analysis, all in the Sina Finance APP