AutoBeta(AutoBeta.net)06/01 Report--

After the Luckin Coffee fraud incident, the operating situation of the Shenzhou Department Company, which also belongs to Lu Zhengyao, is worrying.

On June 1, China car Rental announced that Beijing Automobile Group Co., Ltd. (hereinafter referred to as "BAIC") will acquire a stake of no more than 21.26%. According to the strategic cooperation agreement, BAIC will purchase no more than 450 million shares from Shenzhou Youche, which is equivalent to about 21.26% of the total issued share capital of the company as at the date of this announcement. The details and terms of cooperation between Shenzhou Youche and BAIC are still under negotiation. If the agreement takes effect, BAIC may become the largest shareholder in China car rental.

In fact, BAIC has been working with China car rental for a long time. BAIC was founded in 1958, covering vehicle and spare parts R & D and manufacturing, automobile service trade, integrated travel services, finance and investment, etc. In 2019, BAIC's BAIC Foton transferred Bowo to Shenzhou Youche, which successfully entered the field of auto finance by acquiring a stake in Beijing Baowo.

Even if China is in financial crisis, BAIC still reached a strategic agreement with Shenzhou Youche. On April 13th, BAIC and Shenzhou excellent Automobile Group jointly announced that the two sides would reach comprehensive strategic cooperation through vehicle procurement, new automobile retail, technical cooperation, big data and financial services. According to the cooperation agreement, BAIC and Shenzhou Youche will focus on automobile travel and other businesses to form the complementarity and integration of their resource advantages in technology and industrial chain, so as to realize the deep integration of "traditional automobile + travel industry" and build a travel ecological chain.

BAIC's acquisition of Shenzhou Rental car is also for the consideration of travel brands.

Huaxia Travel Co., Ltd. is a travel company under BAIC Group. The company was founded in February 2017 and is 80% owned by BAIC and 20% by Beijing Chaoyang District SASAC.

The timeshare business of Huaxia Travel is divided into two brands, one is "Mofan Travel", which provides shared car services, and the other is "Beijing Travel", which provides official travel services. This time, BAIC intends to take China Rental car into the bag, which is also conducive to Huaxia Travel to improve the layout of travel services and enhance its popularity, which should be the main reason for BAIC's acquisition of China Rental car.

However, Shenzhou car rental said in the announcement that the details and terms of cooperation with BAIC are still under negotiation and final terms have not yet been reached. Therefore, it is uncertain whether an agreement can be reached.

As a result of the fall in its share price, China excellent Auto has sold its shares in China Rental car several times. On April 3, China excellent car sold its 44.67 million stake in China Rental car (accounting for about 2.11% of the total issued share capital of China car rental) on the market.

On April 16, China Rental car announced that its main shareholder Amber Gem Holdings Limited had reached an equity acquisition agreement with it, and Amber Gem Holdings Limited would buy its total stake of no more than 17.11% from Shenzhou Youche in two batches. On April 22nd, China car Rental announced that the first batch of shares acquired by Amber Gem Holdings Limited had been completed, and China excellent car's stake in China car Rental had dropped from 25.92% to 21.27%.

In order to ensure the smooth progress of the deal, Shenzhou car rental needs to be released from the pledge of these shares. Because if there is a pledge default to be forced to sell, then BAIC's car rental deal with China will eventually fail.

Since Luckin Coffee exposed financial fraud, the share price of China Rental car has plummeted and announced the suspension of trading. On April 7, China car Rental issued a clarification notice that the company did not hold any American depositary shares or other securities of Luckin Coffee and was not involved in any business transactions of Luckin Coffee. Shenzhou car Rental said that although Lu Zhengyao was a shareholder and chairman of Luckin Coffee, he resigned as CEO and changed to a non-executive director in April 2016 and has not participated in the day-to-day management of the Group since.

Clarification announcement failed to quell the storm, Luckin Coffee triggered rumors of car rental acquisition in China. Subsequently, the rumored acquirer Geely Motor denied it, while Ctrip Group declined to comment. Yang Xueliang, vice president of Geely Group, said, "Geely has no plans to buy China, the two sides have never been in contact, and we have no interest in acquiring such a company." Ctrip Group responded to "fake news".

At present, the share price of China Rental car is low, and its operating performance is also under some pressure. On May 31, China car Rental released its first-quarter results. According to the financial report, the total income in the first quarter of 2020 was 1.325 billion yuan, down 28.3 percent from 1.85 billion yuan in the same period last year, while the net profit was-188 million yuan, down 148.2 percent from 390 million yuan in the same period last year. However, as BAIC's proposed acquisition of China car rental shares continued to ferment, China car rental shares rose 23.33% to HK $2.22 on the day.

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