Dahao Technology [603025:CH] announced that it had already finished the acquisition of Red Star Wine (RSW) for RMB12.7bn, as reported by Sina on June 7. In the deal, Dahao bought 100% stakes in Beijing Yiqing Holding for RMB9.82bn, 45% shares of RSW from Beijing Jingtai Investment for RMB2.85bn, and a 1% stake of RSW from Beijing Hongyun Zhihuan for RMB63.3m. Upon completion of the purchase, Dahao holds 100% stakes in RSW. In addition, Dahao plans to raise up to RMB5.2bn in supporting funds from no more than 35 specific entities through a non-public offering of shares. The proceeds will be used to relocate RSW’s spirit industrial park, improve the production lines of Arctic Ocean Orange Soda, and establish an information-sharing platform.
Notably, the major businesses of Dahao and RSW do not overlap. Dahao specializes in computer numerical control technology, motor drive technology, and producing related products. It will absorb RSW’s major businesses including liquor, food, and beverage after this acquisition. RSW had plans to go public as early as 2011 but the company’s two attempts were unsuccessful, and it has also experienced a downturn over the past two years. The company’s revenue for 2019 and 2020 stood at RMB2.64bn and RMB2.34bn, with net profits of RMB492m and RMB431m, respectively. In contrast, its main competitor in the medium- and low-end liquor market, Niulanshan, has achieved a revenue of RMB10.29bn and RMB10.185bn from spirits sales in 2019 and 2020. Aside from that, Dahao also witnessed declined revenue in recent years. In 2020, the firm recorded RMB833m in revenue and RMB214m in net profit, slashing 14.42% YoY and 15.79% YoY, respectively. Based on the acquisition, Dahao aims to develop diversified businesses and improve the company's profitability.