Recently, China Shipbuilding Industry Group Power Co., Ltd. (China Power) issued an announcement deciding to terminate the issuance of convertible corporate bonds and payment of cash to acquire assets, raise supporting funds and related party transaction matters, withdraw the application documents, and sign relevant termination agreements with the counterparties to the transaction.
The announcement shows that China Power intended to purchase a 16.5136% equity stake in China Shipbuilding Diesel Engine Co., Ltd. (CSSC Diesel Engine) held by China State Shipbuilding Corporation Limited (CSSC) by issuing convertible corporate bonds and paying cash, and to issue convertible corporate bonds to no more than 35 specific investors to raise supporting funds. This transaction constituted a connected transaction but did not constitute a major asset reorganization, nor did it constitute a backdoor listing.
On October 26, 2024, China Power planned the issuance of convertible corporate bonds and payment of cash to acquire assets, raise supporting funds and related party transaction matters. On November 8, the company held the 8th meeting of the 8th Board of Directors and the 9th meeting of the 8th Board of Supervisors, which reviewed and passed the “Proposal on the Company’s Plan to Issue Convertible Corporate Bonds and Pay Cash to Acquire Assets, Raise Supporting Funds and for the Connected Transaction” and other proposals related to this transaction.
After the disclosure of the transaction plan, China Power and relevant parties continuously conducted due diligence and analysis on the assets, finances, and other conditions of CSSC Diesel Engine, and actively promoted various tasks for this transaction. On April 29, 2025, the company held the 13th meeting of the 8th Board of Directors and the 13th meeting of the 8th Board of Supervisors, which reviewed and passed the “Proposal on the Company’s Plan to Issue Convertible Corporate Bonds and Pay Cash to Acquire Assets, Raise Supporting Funds and for the Connected Transaction” and other proposals related to this transaction. On May 23, the company held the 2024 Annual General Meeting of Shareholders, which reviewed and passed the “Proposal on the Company’s Plan to Issue Convertible Corporate Bonds and Pay Cash to Acquire Assets, Raise Supporting Funds and for the Connected Transaction”.
On June 30, China Power received the “Notice on Accepting the Application of China Shipbuilding Industry Group Power Co., Ltd. for Issuing Shares to Purchase Assets and Raise Supporting Funds” issued by the Shanghai Stock Exchange (SSE). On July 10, the company received the “Inquiry Letter Regarding the Application of China Shipbuilding Industry Group Power Co., Ltd. for Issuing Convertible Corporate Bonds and Paying Cash to Purchase Assets, Raise Supporting Funds and for the Connected Transaction” issued by the SSE. Starting from August 31, as the financial data in the application documents for this transaction expired, in accordance with the relevant provisions of Article 51 of the “Shanghai Stock Exchange Review Rules for Major Asset Reorganizations of Listed Companies”, the company applied to the SSE for a suspension of the review of this reorganization matter and carried out work to update the financial data in the application documents.
On September 12, China Power held the 17th meeting of the 8th Board of Directors, which reviewed and passed the “Proposal on Terminating the Issuance of Convertible Corporate Bonds and Payment of Cash to Acquire Assets, Raise Supporting Funds and Related Party Transaction Matters and Withdrawing the Application Documents” and the “Proposal on the Company Signing Relevant Termination Agreements with the Counterparties to the Transaction”, agreeing to the company’s termination of this transaction.
It is understood that the overall plan for this transaction included: (1) issuing convertible corporate bonds and paying cash to acquire assets; (2) issuing convertible corporate bonds to raise supporting funds. In this transaction, the acquisition of assets was not conditional on the successful implementation of the supporting fund raising. The success or failure of the final supporting financing issuance would not affect the implementation of the issuance of convertible corporate bonds and payment of cash to acquire assets.
China Power intended to purchase the 16.5136% equity stake in CSSC Diesel Engine held by CSSC by issuing convertible corporate bonds and paying cash, of which RMB 753.2629 million would be paid in cash, and the remaining RMB 3,061.0211 million would be paid through the issuance of convertible corporate bonds.
In this transaction, China Power intended to issue convertible corporate bonds to no more than 35 specific investors to raise supporting funds. The amount of supporting funds to be raised would not exceed 100% of the transaction amount for the listed company to purchase assets by issuing convertible corporate bonds in this transaction, and the initial number of shares converted from the convertible corporate bonds issued to raise supporting funds would not exceed 30% of the total share capital of the listed company after the completion of the asset purchase. The supporting funds raised, after deducting taxes, fees related to this transaction, and intermediary agency fees, were intended to be used for paying the cash consideration for this transaction, the CHD416 diesel engine key parts capacity condition construction project, the intelligent manufacturing core capability enhancement construction project – ship power industry chain collaborative demonstration project, the low-speed diesel engine after-sales service system intelligent platform construction project, and other project constructions, as well as supplementing the working capital of the listed company. The proportion used to supplement the working capital of the listed company would not exceed 50% of the total amount of supporting funds raised.
China Power pointed out that since the launch of this transaction, the company and relevant parties have actively promoted various tasks and strictly fulfilled information disclosure obligations in accordance with relevant regulations. Due to changes in the external environment and relevant circumstances, and to effectively safeguard the interests of the company and its broad investors, after prudent research and overall consideration by the company and relevant parties, it was decided to optimize the transaction plan. Following friendly negotiations with all parties to the transaction, it was decided to terminate this transaction and withdraw the application documents already submitted to the Shanghai Stock Exchange.
The decision to terminate this transaction was made after prudent research by China Power and relevant parties, and full communication and friendly negotiation with the counterparties to the transaction. Currently, China Power’s production and operations are normal. The termination of this transaction will not have a significant adverse impact on the company’s production, operations, and financial condition, and there is no situation that damages the interests of the company and its minority shareholders. China Power still holds a 51.8526% equity stake in CSSC Diesel Engine, making it the largest shareholder, and consolidates its financial statements.
