The "nine lives" of Neusoft Group, Liu Jiren's capital ambitions

Xunxia has written about many listed companies with the original intention of "looking for flaws and waiting for gaps". His original intention is to clarify the underlying logic and core key points behind capital operations in the complex public information.

For example, Dongxu Group’s financial company; Hero Interactive Entertainment’s “financing-gambling-related party acquisition”; Tianfeng Securities’ status of no actual controller and large financing at critical times; Yiyang Xintong's listed company was kept in a shell and the group was forced to go bankrupt.

Success or failure is just the surface of business war, and the core logic behind it is the essence of capital operation.

The former school-enterprise "Neusoft Group" was established in 1991. By 2020, it has developed into controlling Neusoft Group (SH.600718) and Neusoft Education (HK.9616), and successfully spun off Neusoft Medical, Neusoft Xikang, and Wanghai Kangxin are holding groups preparing to be listed on the Science and Technology Innovation Board. The actual controller has also changed from Northeastern University to the state of "no actual controller" under the leadership of Liu Jiren.

The core logic of "Neusoft" capital operation is spin-off and MBO. The two complement each other, promote the development of innovative businesses through spin-off, and promote the control of Neusoft Group through MBO.

Liu Jiren, China’s first doctorate in computer science, became China’s youngest university professor at the age of 33. He built China’s first software park and single-handedly created a highly influential software empire.

In 1988, the Software and Network Engineering Research Laboratory of the Department of Computer Science of Northeastern Institute of Technology was established. The entire family consisted of a research room and a half, three 286 computers, and a research fund of 30,000 yuan.

It was in this research environment that Liu Jiren, who returned to China after studying at the National Bureau of Standards and was promoted to professor, established a technology transfer center.

In 1989 and 1991, Japan's Alpine Co., Ltd., which mainly produces car audio and car communication systems, visited Northeastern University twice to seek cooperation in research on automotive internal systems. In the end, Liu Jiren's team impressed Alpine. Received US$300,000 in start-up capital.

Northeast Institute of Technology Open Software System Development Company and Alpine jointly established Shenyang Donggong Alpine Software Research Institute, which was later merged into Dongda Alpine Software Co., Ltd. This was the starting point of Neusoft Group. It was also a later listed entity.

Neusoft's development takes 2011 as the boundary, from "integration" before 2011 to "division" after 2011.

From 1993 to 1995, a distant era when IPOs still implemented a quota system, Shenyang Dongda Alpine was backed by Northeastern University and belonged to an institution affiliated to the Ministry of Metallurgical Industry. In 1995, it was approved to obtain a listing quota. And it was successfully listed in 1996. 4 million internal employee shares, accounting for 10% of the total pre-issuance share capital, will be listed and circulated in batches.

At the beginning of the listing, the controlling shareholder of Dongda Alpine was the Northeastern University Software Center. The interests of the management team and employees were mainly reflected in 4 million internal employee shares, but the team’s demands were obviously more than that.

In 1998, Northeastern University was changed from being under the Ministry of Metallurgy to directly under the Ministry of Education. In May, Northeastern University Software Center transferred its shares of listed companies to Northeastern Software Group. In November, Baosteel Group The software group increased its capital and the company was renamed Baosteel Neusoft. One year later, Baosteel Group, Northeastern University Software Center and others transferred 21 shares to the Baosteel Neusoft Labor Union, and the interests of employees were reflected to a greater extent through the labor union.

In 2001, Baosteel Neusoft changed its name to Neusoft Group. Due to compliance considerations, the Baosteel Neusoft Labor Union finally quantified it as Shenyang Huixu Technology, a shareholding platform for 137 employees. Until 2008, Shenyang Huixu Technology held 23.42% of Neusoft Group's shares, making it the second largest shareholder after Northeastern University.

In 2008, the China Securities Regulatory Commission approved the merger of Neusoft Group and Neusoft Co., Ltd., and the listed company was renamed "Neusoft Group".

All parties have benefited greatly from the merger of Neusoft Corporation and Neusoft Group, which have been developing in parallel. As of the end of 2010, the major shareholder Northeastern University Industrial Group held a market value of 3.470 billion yuan, the employee stock ownership platform as the second largest shareholder held a market value of 3.381 billion yuan, Alpine held a market value of 2.747 billion yuan, and Baosteel held a market value of 1.954 billion yuan.

In 2011, the first phase of Neusoft Group's development ended with the liquidation of the employee stock ownership platform, and all 137 natural person shareholders gained considerable wealth.

In March 2011, the shareholding platform was transferred to Chengdu and renamed Chengdu Huixu Technology. It was forced to liquidate through a court ruling and the shares held by the shareholding platform were distributed to 137 shareholders. Liu Jiren, who started his own business from scratch and led Northeastern University, Alpine, Baosteel and 137 employees to make a fortune. After securing his shares, he held a total of 7.16 million shares of listed companies, accounting for 0.58 of the listed company's shares.

Neusoft Holdings also came to the stage under this background.

For Neusoft Holdings, which started out as the School of Software at Northeastern University, Neusoft education is of extraordinary significance. Neusoft Holdings’ first battle is to win over Neusoft Education.

In November 2011, Neusoft Holdings was jointly established by Dalian Kangruidao, Northeastern University and Yida Investment***. Behind Dalian Kangruidao are Liu Jiren and 22 other natural person shareholders.

Neusoft Group’s education business started in 2001 and became profitable in 2007, with revenue of 305 million yuan and profit of 1.68 million yuan that year.

In 2008, after the merger of Neusoft Group and Neusoft Holdings, the education sector was incorporated into the listed company system with Dalian Neusoft Software Park Industrial Development Co., Ltd. as the main body.

In December 2011, the listed company announced that Neusoft Holdings had transferred the education assets of Neusoft Group for a consideration of 424 million yuan. This consideration was only based on the consolidated net assets and included 10.43% of the housing and land. value added.

In 2020, Neusoft Education applied for listing on the Hong Kong Stock Exchange. From 2017 to 2019, its net profits were 115 million yuan, 132 million yuan, and 139 million yuan. On the eve of its listing, it became the "King of the Black Market" with a surge of more than 25% and a market value of 4 billion yuan.

While divesting Neusoft Education, in 2012, Neusoft Holdings and Yida Group jointly established Tianjin Neusoft Ruidao to provide IT training and talent services to colleges and universities. It realized a profit of 34.97 million yuan that year.

In addition to higher education tuition and accommodation fees, which account for nearly 80%, Neusoft Education's profit structure also includes income from the "integration of industry and education" achieved through Neusoft Holdings.

From 2012 to 2014, Neusoft Group paid service fees of 32.5 million yuan, 121 million yuan and 133 million yuan to Tianjin Neusoft Ruidao respectively. After 2015, Neusoft Group disclosed the amount of related transactions through mergers, paying service fees of 178 million yuan that year. In 2019, Neusoft Group paid as much as 390 million yuan in service fees to Neusoft Holdings.

The listed company Neusoft Group divested its education sector and entrusted Neusoft Holdings to provide software outsourcing services. The outsourcing gross profit margin was 13. It can be said that it killed two birds with one stone. Neusoft Education achieved stable profits, and Neusoft Holdings and its shareholders gained considerable profits.

Back then, when the education sector was divested from the listed company, the consideration was only net assets plus a mere 10.43 in assessed value. Neusoft Education, which grew and grew until it was independently listed, failed to bring benefits to the listed company.

status.

Since 2015, Northeastern University, Alpine, and Baosteel, the major shareholders of Neusoft Group, have successively reduced their holdings in listed companies.

In March 2015, Baosteel Group announced that it had reduced its holdings by 5.2% in total. After the reduction, the shares held accounted for 4.72% of the total share capital of Neusoft Group.

In July 2015, Alpine transferred 5 shares of Neusoft Group to Neusoft Holdings for a total consideration of 1.066 billion yuan.

In December 2016, Northeastern University Industry Group announced that the cumulative reduction ratio reached 5% of the total share capital of Neusoft Group.

At the same time, the management team and introduced shareholders increased capital of Neusoft Holdings, and Neusoft Holdings increased its holdings in listed companies twice, eventually becoming the largest shareholder.

In September 2015, PICC increased its capital to Neusoft Holdings by RMB 1.012 billion.

In December 2015, Alpine increased its capital to Neusoft Holdings by RMB 577 million.

After the capital increase, the valuation of Neusoft Holdings reached 5.574 billion yuan. However, according to the 2014 annual report of Neusoft Holdings, the net assets were 370 million yuan and the net profit was only 32.7834 million yuan.

In November 2016, Dalian Neusoft Thinking, a subsidiary of Dalian Kangruidao Holdings, increased its capital to Neusoft Holdings. Based on the 2015 valuation of 5.574 billion, the capital increase increased to 1.082, costing more than 676 million yuan. Dalian Neusoft Thinking Net assets in 2013 were only 9.48 million yuan.

Neusoft Holdings was able to raise more than 2.2 billion yuan three times at a valuation of 4 billion to 5 billion. This is inseparable from the acquisition of Neusoft Education in 2011 and the realization of outsourcing service income. It also gained the bargaining chip to further control Neusoft Group. .

In December 2016, Neusoft Holdings increased its holdings in listed companies to 10, with a transaction consideration of 1.193 billion yuan.

In January 2017, Neusoft Holdings once again increased its holdings to 11.37, with a transaction consideration of 325 million yuan.

At this point, as the original major shareholder Northeastern University and the second shareholder Alpine successively reduced their holdings and gave up their controlling position, Neusoft Holdings became the largest shareholder of Neusoft Group with a total consideration of approximately 2.584 billion. The main source of funds is the capital increase from PICC, Alpine and Dalian Kangruidao. In March 2017, Neusoft Holdings pledged all its shares in listed companies.

From 2014 to 2017, through capital increases and equity transfers, Neusoft Group successively lost control of Neusoft Medical, Neusoft Xikang and Neusoft Wanghai.

Neusoft Medical, a subsidiary of Neusoft's health sector, originates from the CT equipment of the Northeastern University Imaging Center; Neusoft Xikang is the operating entity of the cloud hospital sector; Neusoft Wanghai's main business is medical informatization.

In December 2014, Neusoft Group announced that Neusoft Medical plans to introduce investors. Hony Capital, Goldman Sachs, Tonghe and Neusoft Holdings will invest 2.733 billion yuan (including capital increase) through the transfer of old shares and capital increase. 1.6 billion yuan), a strategic investment in Neusoft Medical, with a pre-money valuation of 2.5 billion yuan. Among them, Neusoft Holdings invested 900 million yuan, and after the capital increase, it holds a 22.2% stake in Neusoft Medical.

In July 2016, after two rounds of delivery agreements, Neusoft Group lost control of Neusoft Medical.

In September 2017, Dalian Kangruidao continued to increase its investment in Neusoft Medical by 422 million yuan at a valuation of 4.254 billion yuan.

Neusoft Holdings and Dalian Kangruidao acquired approximately 24.4% of Neusoft Medical’s shares for a total consideration of approximately 1.322 billion.

In July 2020, Neusoft Medical applied to be listed on the Science and Technology Innovation Board. At the end of 2019, Neusoft Medical had an operating income of 1.9 billion yuan, while the comparable company Wandong Medical had an operating income of 980 million yuan and a market value of 7.38 billion yuan.

In the same way as Neusoft Medical's battle, Neusoft Xikang introduced US$170 million in financing from investors such as Hony, Goldman Sachs, and Neusoft Holdings, and then introduced US$64 million in financing from PICC and Alps Electric Co., Ltd. Until July 2016, Neusoft Group lost control of Neusoft Xikang.

Neusoft Holdings acquired a total of 23.4 shares through two capital increases of US$43 million and RMB 94 million in Neusoft Xikang. Currently, Neusoft Xikang is also actively preparing for listing on the Science and Technology Innovation Board.

It is worth noting that the split of Neusoft Healthcare and Neusoft Xikang happened to coincide with the capital increase of PICC and Alpine in Neusoft Holdings:

In December 2014, Neusoft Group announced The spin-off plan of Neusoft Healthcare and Neusoft Xikang.

In September and December 2015, PICC and Alpine increased their investment in Neusoft Holdings based on a pre-investment valuation of 4 billion.

In April 2016, Neusoft Holdings completed the capital increase in Neusoft Healthcare and Neusoft Xikang.

The unavoidable question is whether Neusoft Medical and Neusoft Xikang were taken into consideration when PICC and Alpei increased their investment in Neusoft Holdings. Otherwise, it is difficult to explain the rationality of giving a valuation of 4 billion to a company with net assets of 370 million and net profit of 32.78 million.

Neusoft Wanghai’s listing plan is also under preparation.

In December 2015, Ping An Jianteng and Neusoft Holdings strategically invested in Neusoft Wanghai through capital increase and share transfer. Among them, Neusoft Holdings invested 206 million yuan, acquiring a total of 14.07 shares.

In November 2017, Ping An Life, Taikang, and Neusoft Holdings increased capital in Neusoft Wanghai with 1.504 billion yuan. Neusoft Group's equity ratio in Neusoft Wanghai dropped to 29.3, and it no longer controls Neusoft Wanghai. Neusoft Holdings invested a total of 223 million yuan in two rounds, holding 8.23% of the shares.

Throughout the history of Neusoft’s development, in Liu Jiren’s words, “The purpose of retreat is to achieve greater development.”

Before 2011, “merger” was the The main line is that the listed company acquired the Northeastern University Imaging Center to enter the medical sector, Neusoft Group merged with Neusoft Co., Ltd., and the education sector was merged into the listed company.

In the process of "merger", Neusoft Group's employee stock ownership platform made its first pot of gold.

After 2011, with the main line of "spin-off", Neusoft Education was sold and Neusoft Medical, Neusoft Xikang and Neusoft Wanghai were spun off.

In the process of "spin-off", Neusoft Holdings acquired the controlling stake of Neusoft Education, and its software outsourcing business received support. It eventually made a lot of money through the independent listing of Neusoft Education.

At the same time, the equity appreciation of Neusoft Education and the spin-off plans of Neusoft Medical and Neusoft Xikang have provided support for the high valuation of Neusoft Holdings’ introduction of strategic investors in 2015. "Spin-off" once again created Neusoft Holdings and its employee stock ownership platform.

Neusoft Holdings' capital operation model of using "eggs" to attract "chickens" can be described as exquisite, and it has achieved explosive growth in ten years. However, in this process, the listed company, as an "incubator", did not benefit:

After acquiring educational assets, large-scale related transactions occurred between the listed company and Neusoft Holdings every year, which supported Neusoft Holdings' growth. Valuation and part of the profit sources of Neusoft Education;

During the spin-off of Neusoft Medical and Neusoft Xikang, the listed companies have promised repurchase responsibilities. If the listing is successful, shareholders including Neusoft Holdings will receive Huge profits, once it cannot be listed, the listed company may face the risk of contingent liabilities from repurchasing shares;

In the process of spinning off the big health sector, it successfully circumvented the Securities Regulatory Commission through the identification of no actual controller.

However, in the three years since October 2017, the market value of Neusoft Group has dropped by 5 billion yuan. The continuous spin-off model is really the most beneficial choice for listed companies. ?

Liu Jiren likes to say that "cats have nine lives" to say that Neusoft changes its lifestyle every five years. For Liu Jiren, the spring breeze of the great era of equity investment may make all Neusoft companies go public. A vast capital territory.