Huafeng Chemical Restarts 6 Billion Yuan Mergers & Acquisitions Deal

On June 5, Huafon Chemical, a leading polyurethane materials company, disclosed the Plan for Issuing Shares and Paying Cash to Purchase Assets and Related-Party Transaction.

HuaFeng Chemical plans to issue shares and pay cash to Huafeng Group Co., Ltd. (hereinafter referred to as "Huafeng Group"), You Xiaoping, You Jinhuan, and You Xiaohua to acquire 100% equity of Zhejiang Huafeng Synthetic Resin Co., Ltd. (hereinafter referred to as "Huafeng Synthetic Resin"); and plans to issue shares and pay cash to Huafeng Group to acquire 100% equity of Zhejiang Huafeng Thermoplastic Polyurethane Co., Ltd. (hereinafter referred to as "Huafeng Thermoplastic").

Huafon Chemical is not launching this acquisition proposal for the first time. Last year, Huafon Chemical had already planned to acquire these two major target assets. At that time, the total value of the related-party acquisition plan was as high as 6 billion yuan. However, the shareholders’ meeting did not approve the acquisition.

According to the newly released proposal on June 5, the listed company plans to initiate another acquisition. The announcement clearly states that, as of the signing date of the proposal, the audit, valuation, and other related work for this transaction have not yet been completed, and the appraised value and transaction price of the relevant assets have not yet been determined. The consideration for the target assets in this transaction will be based on the valuation results issued by the asset appraisal institution engaged by the listed company, determined through consultation among all parties, and disclosed in the restructuring report.

This restructuring also saw significant changes in the pricing of the share issuance. In accordance with relevant regulations and as finally determined through negotiations among the parties to the transaction, the issue price for the shares to be issued to purchase assets in this transaction was set at RMB 8.55 per share, not lower than 80% of the average trading price of the stock over the 20 trading days prior to the pricing benchmark date. This issue price represents a substantial increase compared with RMB 6.14 per share under the 2025 plan.

Previously, at the online performance briefing of Huafeng Chemical for the year 2024, an investor asked: "The company issues shares at a low price and purchases assets from the major shareholder at a high premium, which is a clear transfer of benefits and harms the interests of minority shareholders. Does this comply with legal regulations and other conditions?"

In response, Huafon Chemical stated that the issue price of the shares was determined in accordance with the pricing method prescribed by regulations, and the asset valuation was conducted by a professional institution. The procedures for this project were compliant, the pricing was reasonable, and no interests of minority shareholders were harmed.

Huafeng Chemical stated that this transaction is an acquisition in the polyurethane industry under the same control. As a leading enterprise that has been deeply engaged in the polyurethane industry for many years, the company currently ranks first in the world in the production of spandex, polyurethane prepolymers, and adipic acid. By acquiring these two target companies, the listed company will achieve industrial chain integration and extension, entering the fields of modified polyurethane resin and TPU manufacturing, thereby enriching its business types and product lines.

Huafeng Chemical Financial Data