Hua Hong's restructuring plan is out, and it will resume trading tomorrow!

On August 31, Hua Hong disclosed a restructuring plan, proposing to acquire a total of 97.4988% equity in Hua Li Wei from Hua Hong Group and three other trading parties through the issuance of shares and cash payment. The company plans to issue stocks to no more than 35 qualified specific objects to raise matching funds. The company's stock will resume trading on September 1.

Specifically, the trading parties in this transaction include Hua Hong Group, Shanghai Integrated Circuit Fund, Big Fund Phase II, and Guotou Xian Dao Fund. The issuance price of Hua Hong's shares is set at 43.34 yuan/share, while the final transaction price of the underlying assets has yet to be determined. In terms of lock-up period arrangements, the shares subscribed by Hua Hong Group in this transaction will have a lock-up period of 36 months, while the shares subscribed by Shanghai Integrated Circuit Fund, Big Fund Phase II, and Guotou Xian Dao Fund will be locked for 12 months.

The raised matching funds are intended to supplement working capital and repay debts, pay cash consideration, fund project construction of the target company, and cover intermediary fees and transaction taxes related to this transaction. The specific uses and amounts of the raised matching funds will be disclosed in the restructuring report. Among them, the proportion used to supplement working capital and repay debts will not exceed 25% of the proposed purchase asset transaction price or 50% of the total raised matching funds.

Eliminating Industry Competition

One of the main purposes of Hua Hong's full acquisition of Hua Li Wei is to fulfill the commitment to eliminate industry competition.

Hua Li Wei owns the first fully automated 12-inch integrated circuit chip manufacturing production line in mainland China, primarily engaged in integrated circuit wafer foundry services, focusing on logic and RF, embedded non-volatile memory, standalone non-volatile memory, and high-voltage process platforms, covering 65/55nm and 40nm process nodes. It provides complete technical solutions to customers through a wide range of process combinations, applied in communication, consumer electronics, and other end product markets.

Before this transaction, Hua Li Wei and the listed company both had 65/55nm and 40nm process foundry capabilities.

After the completion of this transaction, Hua Li Wei's 65/55nm and 40nm logic processes and specialty process technologies will be directly injected into the listed company. The industry competition in 65/55nm and 40nm between Hua Hong and other companies controlled by the controlling shareholder, excluding the listed company and its controlled subsidiaries, will be substantially resolved, effectively safeguarding the legitimate rights and interests of all shareholders, especially minority shareholders.

As a global leader in specialty process wafer foundry and the wafer foundry company with the most comprehensive coverage of specialty process platforms in the industry, Hua Hong primarily engages in customizable semiconductor wafer foundry services based on various process nodes and different technologies. The company focuses on expanding specialty process technologies, mainly concentrating on embedded/standalone non-volatile memory, power devices, analog and power management, logic and RF, and other specialty process platforms

Enhancing the Profitability of Listed Companies

After the completion of this transaction, the listed company will add a monthly capacity of 38,000 pieces of 65/55nm and 40nm, further enhancing the asset scale and profitability of the listed company.

Financial data shows that Hua Hong's operating revenues for 2023, 2024, and the first half of 2025 are 2.579 billion yuan, 4.988 billion yuan, and 2.466 billion yuan respectively, with net profits of -363 million yuan, 530 million yuan, and 344 million yuan respectively.

As of the date of signing the proposal, the audit and evaluation related to this transaction have not yet been completed, and the proposed transaction price for the target assets has not been finalized.

Hua Hong stated that through this transaction, the listed company will further enhance its 12-inch wafer foundry capacity. The complementary advantages of both parties' process platforms can achieve deep integration, jointly building a wafer foundry and supporting services that cover a wider range of application scenarios and more complete technical specifications, providing customers with more diverse technical solutions and enriching the product system. At the same time, through the integration of R&D resources and sharing of core technologies, both parties are expected to generate synergies in process optimization, yield improvement, and device structure innovation, accelerating technological innovation iterations and jointly enhancing technological barriers and core competitiveness in logic processes and specialty processes. In addition, the listed company will achieve integrated management through consolidated control, realizing deep integration in internal management, process platforms, custom design, and supply chains, achieving economies of scale through cost reduction and efficiency enhancement, thereby increasing the company's market share and profitability.

Source: Shanghai Securities Journal, Original title: "Chip Giant, Restructuring Plan Released, Resuming Trading Tomorrow"

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