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Shandong Huayang's Reorganization with Mining Company Encounters Resistance

June 14, 2011, CCM - After about three months' stock trading suspension for the discussion of reorganization, Shandong Huayang Technology Co., Ltd. (Shandong Huayang), a large pesticide company in Shandong Province, resumed its stock trading on 29 April 2011. With Shandong Huayang changing into mining company, its stock records seven surging limits after the resumption. At the same time, Shandong Huayang reveals the plan of its reorganization with Zibo Hongda Mining Co., Ltd. (Zibo Hongda), a big mining company and the biggest share holder-to-be of Shandong Huayang. Shandong Huayang plans to set out all of its assets and liabilities aiming to issue 254 million shares to Zibo Hongda and other investors. The price of each share is set to be USD1.46. Once the plan is successfully carried out, the total assets and liabilities of Zibo Hongda and some equities of other investors will be injected into Shandong Huayang. All the related assets are iron ore assets, worth USD414.11 million. However, although the reorganization plan has been released, there is still some problems lying ahead making the reorganization of Shandong Huayang unstable. Firstly, after analyzing the asset conditions of Zibo Hongda, a big problem comes out and it may be the main obstacle to the reorganization. According to Zibo Hongda, most of the assets in its subsidiaries, such as the exploitation right, etc., are pledged for loans from bank and the pledge period lasts for several years. If the pledge condition of these assets can not be removed in the near future, the reorganization plan may be not that easy to carry out. Secondly, mining companies who intend to launch backdoor listing may be not that easy in China due to the special nature of mining industry with limited resource and the much complicated procedure to get the exploitation right. In 2010, no mining companies has been approved by China Securities Regulatory Commission (CSRC) to conduct backdoor listing. Thirdly, on 26 Aug. 2010, Shandong Huayang was investigated by CSRC for being suspected of violating securities laws and regulations. Although the investigation is finished, the result has not been released by now and the reorganization will somehow be influenced. we now can't be too early to give a prediction about the result of the reorganization of Shandong Huayang due to unstable conditions in the progress, even though both Shandong Huayang and Zibo Hongda show their confidence toward the reorganization plan. But we can sure that Shandong Huayang needs the reorganization. Global economic recession, overcapacity, chaotic pesticide industry and other factors in China have caused the downturn of pesticide industry in recent years. Huayang Technology as one of the famous listed pesticide enterprises in China has posted depressed performance in the last three years. On 29 April 2011, Shandong Huayang released its Financial Report of 2010 showing its great deficit in 2010. Its revenue and net profit in 2010 reached USD77.70 million and USD9.24 million, up 25.30% and down 1480.09% respectively over last year. Then in the next day, it


disclosed that the Q1 Financial Report of 2011 also showed deficit with Q1 net profit in 2011 reaching USD-1.46 million.

Source: Crop Protection China News 1109

Content of Crop Protection China News 1109:

Shandong Huayang’s reorganization runs aground Nutrichem to develop pesticide technology for Huapont Pharm Lianyungang Jindun to launch carbendazim production line Fujian Sannong: pesticide production suspended Zibo Wanchang to launch IPO Imported pesticides supported more by goverment? ChemChina's acquisition of MAI totally approved by China An explosion happens in Guangxi Jinsui Hunan releases Twelfth Five-year Plan for Pesticide Industry (Hunan)

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Shandong Huayang's Reorganization with Mining Company Encounters Resistance