The landscape of M&A in China's A-share market continues to sizzle with activityOn December 17, Huaihe Energy made waves by announcing plans to acquire an impressive 89.3% stake in Huaihe Energy Power Group from its controlling shareholder, Huainan Mining GroupThis venture, which involves issuing shares and cash payments, also includes plans for fundraising to support the acquisitionIt's important to note that this merger is preliminary and is projected to constitute a significant asset restructuring for Huaihe EnergyIn parallel, Neusoft Group declared its intentions to acquire 100% of Shanghai Sifang Information Technology Co., indicating that this trend of consolidation is gaining momentum across various sectors.

That very evening, companies like Cinda Holdings, Guocheng Mining and Shennhua Group followed suit with their own acquisition announcementsThe common denominator among these transactions is the pursuit of assets held by their controlling shareholders or the largest stakeholders

For instance, Cinda Holdings plans to buy 10% of Jindong Real Estate from its major shareholder, Xiamen Cinda Group, at a notable price of 3.066 billion yuanFollowing this acquisition, Cinda Holdings will command a 64.654% stake in Jindong Real EstateSimilarly, Shennhua Group is set on acquiring a 44.55% stake in Henan Shenma Catalytic Technology Co., along with an additional 8.18% stake from its employeesOnce completed, Shennhua is expected to control 52.73% of the company, officially making it a subsidiary.

This flurry of activity is particularly pronounced among local state-owned enterprises, sparking discussions among market analystsMany believe that local SOEs are demonstrating an increasing focus on market capitalization management, which hints at a broader trendA pivotal takeaway is that this movement among local enterprises might spur central enterprises to prioritize the market performance of their listed holdings

By regulating and enhancing their value management frameworks, these companies can elevate their investment appeal in the eyes of shareholders and potential investors alike.

Huaihe Energy, primarily engaged in thermal power generation, electricity sales, rail transportation, and coal blending, has a controlling stake held by Huainan Mining Group, which is under the supervision of the Anhui Provincial State-owned Assets Supervision and Administration CommissionBack in 2016, Huaihe Energy executed a major asset restructuring project which incorporated select assets from the coal and power divisions of its controlling shareholder, giving rise to a new era characterized by “energy + logistics” quality development.

The winds of change have been blowing favorably for the M&A sector throughout 2023. There has been a growing expectation among external observers regarding Huainan Mining Group's asset injections into the publicly listed Huaihe Energy

In September, Huaihe Energy indicated it was uncertain about the controlling shareholder's overall listing plans but cited earlier promises made during the 2016 restructuring, which included the future integration of several power generation projects into the listed entity once operational conditions are met.

Historically, Huainan Mining Group has attempted to pursue overall listing via Huaihe Energy on two occasions, both of which concluded unsuccessfullyThe initial setback involved property rights issues, while the latter attempt was derailed by a hefty government claim of 3.66 billion yuan stemming from legacy problems related to mining rights.

Nevertheless, amidst the setbacks to overall listing, Huainan Mining has consistently channeled assets toward the listed armIn June of this year, Huaihe Energy completed the acquisition of 100% stake in the Panji Power Company held by the Power Group

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Prior to that, Huaihe Energy had acquired various assets associated with New Zhuangzi Power Plant in 2016 and 100% of the electricity sales company linked to Huainan Mining Group in 2017.

In light of Huaihe Energy's recent endeavors, the targeted Huaihe Power operates primarily within energy generation and supplyAccording to available data, Huaihe Power acts as the holding platform for Huainan Mining Group’s electricity business, overseeing various assets such as the Xieqiao Power Plant and Luhe Power Plant, alongside renewable energy initiatives.

From a market perspective, if this transaction comes to fruition, it stands to strengthen Huaihe Energy's dominance within the electric power sector while simultaneously addressing intercompany competition with Huainan MiningThis synergy aligns well with the overarching trend of “integrated coal production” which could further enhance the efficiencies of their coal blending operations.

Moving on to another significant player in the market, Neusoft Group—China's first publicly listed software entity—has been evolving into a major software conglomerate focused on healthcare, social security, intelligent automotive connectivity, intelligent cities, and enterprise connectivity

The company has unveiled plans to acquire 100% of Sifang Information, with a combination of cash and share-based transactions.

Sifang Information, established in November 2013, operates both offshore and onshore business outsourcing with a focus on high-tech services covering the entire nationReports indicate that this enterprise had total assets of 575 million yuan in 2023, with revenues amounting to 942 million yuan and a net profit of approximately 60.09 million yuan.

Notably, Dalian Neusoft’s stake in Sifang Information places it as the second-largest shareholder, while Neusoft Group itself holds the primary shareConsequently, Neusoft characterized the acquisition as a related transaction that is not expected to qualify as a significant asset restructuring or reorganization.

Interestingly, it's crucial to highlight that Shanghai Ruiming Talent Technology Group serves as an indirect wholly owned subsidiary of the Hong Kong-listed company Renrui Talent, which simultaneously announced that it had signed a letter of intent with Neusoft concerning the sale of Sifang Information's complete stake.

Industry insiders speculate that Neusoft Group's acquisition of Sifang Information marks a sound strategy to explore new digital service ventures