How do we assess the remaining "pieces" of the "former Shandong richest" in the capital market?
The much-anticipated billion-dollar acquisition by Goertek Inc. (002241.SZ), a leader in the fruit supply chain, ended abruptly on the evening of October 17th with an announcement that caught significant market attention over nearly three months.
Goertek announced the termination of its planned acquisition of 100% equity in two wholly-owned subsidiaries of Lianfeng Commercial Group Co., Ltd.—Mia Precision Technology Co., Ltd. and Changhong Industry Co., Ltd. The reason provided was that after actively advancing due diligence, auditing, assessment, and engaging in multiple rounds of communication and negotiation, the two parties ultimately failed to reach an agreement on key terms of the transaction.
However, according to reports from the Daily Economic News, sources revealed that the termination of the acquisition might be related to issues discovered during the due diligence process regarding the target assets, which ultimately led to the inability to reach a consensus.
Goertek further stated in the announcement that the decision to terminate this equity acquisition was a mutual agreement with the transaction counterparty, and no party will bear compensation or legal liabilities. The termination of this acquisition does not require the approval of the company’s board of directors or shareholders and will not adversely affect the company’s operational performance or financial condition, nor will it harm the interests of the company and all shareholders.
Since the announcement of the acquisition in July, Goertek's stock price has risen by more than 30%. Following the announcement of the termination, on the first trading day of October 20th, Goertek's stock price fell by 2.53%, closing at 30.41 CNY per share, with a total market capitalization of 106.5 billion CNY.
Failed Billion-Dollar Acquisition
This acquisition can be traced back to the evening of July 22, when Goertek announced reaching a preliminary intention with Hong Kong Lianfeng Commercial Group Co., Ltd. to acquire 100% of Mia Precision Technology Co., Ltd. and Changhong Industry Co., Ltd. for approximately 10.4 billion HKD (approximately 9.5 billion CNY). This was the most significant acquisition for the "fruit supply chain leader" this year, targeting key technological breakthroughs in precision manufacturing.
In fact, Goertek began its layout in the smart hardware business as early as 2012. By 2021, the revenue of the smart hardware segment outpaced that of the integrated intelligent acoustic business; in 2022, revenue from the smart hardware segment nearly doubled compared to the previous year, accounting for 60% of the company's total revenue.
Specifically, Goertek’s smart hardware business began with outsourcing for home gaming consoles, gradually expanding into fields such as VR/AR products, smartwatches, and fitness bands. Now, the emergence of new smart hardware products continues to evolve under the drive of AI technology, leading to increasing demands for material performance, aesthetics, and precision. Goertek explicitly stated that the core motivation for this acquisition was to respond to the industry trend of "increasing demands for precision structural components and other parts."
The two companies targeted for acquisition, Mia Precision and Changhong Industry, have deep expertise in the precision metal component field. Metal structural component technology is a core element of high-end consumer electronic products, directly affecting product quality, heat dissipation performance, and structural strength. In the AI hardware era, the technical threshold in this field continues to rise. With the popularity of AI glasses, VR headsets, and other new smart terminals, the demand for lightweight and high-strength precision structural components is surging.
Goertek's precision components business is projected to achieve revenue of 15.051 billion CNY in 2024, an increase of 15.85% year-on-year, with a gross profit margin rising to 21.51%, demonstrating the profit potential of this sector. The announcement indicated that the two companies have established long-term partnerships with industry-leading customers, with a combined projected revenue of approximately 9.11 billion HKD for the 2024 fiscal year, signifying considerable business scale. Upon completion of the acquisition, Goertek’s precision structural component business scale would significantly expand.
This acquisition marks a shift in Goertek's merger and acquisition strategy. Industry analysts point out that Goertek’s core logic in acquisitions has transitioned from "product logic centered on technology" to "product logic centered on large customers." The acquisition was expected to complement and create synergies with Goertek's existing precision structural component business. The company highlighted in its announcement that the acquisition would help "further enhance vertical integration capabilities" and "improve the scale and profitability of the precision structural component business." By integrating the technical expertise and customer resources of both companies, Goertek was poised to enhance its overall competitiveness across various fields, including consumer electronics, automotive electronics, and smart hardware.
With the aborted acquisition after three months, what impact will this have on Goertek’s shift away from the "fruit supply chain"?
Changing the Precision Blueprint?
Goertek operates three major business lines: precision components, smart hardware, and integrated intelligent acoustics, with the first two product categories widely utilized in smartphones, tablets, VR/AR, smart wearables, and smart home devices; while the primary products in integrated intelligent acoustics include wireless/wired earphones and smart speakers. In the fierce competition for the head position in the "fruit supply chain," the aborted acquisition may alter the competitive landscape. By strengthening its capabilities in precision structural components, Goertek can better serve both Apple and non-Apple clients.
Hai Tong International's research report had previously suggested that if the acquisition proceeded smoothly, Goertek would enter the precision exterior metal parts and internal structural parts business for North American major client mobile products, as well as the precision metal parts business for North American major client watches. More importantly, this institution anticipated that the acquisition would significantly boost Goertek’s profits, estimating that potential profit growth relative to the company’s expected net profit for 2025 could reach around 25-30%, based on an industry average net profit margin of 10-13%.
The termination of this acquisition could directly impact Goertek’s strategic layout in the precision structural component field.
However, from a financial perspective, the termination preserves nearly 10 billion CNY in cash resources for Goertek. Previous announcements indicated that Goertek planned to utilize internal or self-raised funds. The company’s Q1 2025 report showed cash funds of 21.744 billion CNY, declining to 20.179 billion CNY in the first half of 2025, and the acquisition would have depleted a significant portion of the company’s cash reserves.
Shen Meng, a director at Xiangsong Capital, believes that the current market is somewhat lacking in rationality, with emotional effects influencing companies’ assessments of their own value and lacking long-term development expectations, often leading to overestimations of asset operating potential. Publicly listed companies need to evaluate the target’s value attributes from the perspective of synergistic effects while also analyzing from financial angles such as free cash flow, paying closer attention to a conservativism perspective on uncertainties. Terminating the acquisition in the short term will not weaken the competitiveness of the listed company, and there remain other merger and acquisition options that can provide competitive advantages.
Family of "Former Shandong Rich" Cashes Out Over 10 Billion
While the acquisition was terminated, Goertek’s efforts in other areas remain ongoing.
In October of this year, Goertek disclosed plans for its subsidiary, Goertek Optics, which is pursuing a significant deal. Goertek Optics aims to increase its registered capital by 530 million CNY through a private placement to acquire the full 100% equity of Shanghai Aolai for a transfer price of 1.903 billion CNY. Goertek stated that this move is intended to further enhance the company’s core competitiveness in wafer-level micro-nano optical devices, supporting future developments in whole machine businesses like AI smart glasses and AR augmented reality.
Additionally, in terms of capital operations, Goertek Microelectronics is also actively pushing for an IPO in the Hong Kong stock market. In July of this year, Goertek Microelectronics submitted its listing application to the Hong Kong Stock Exchange, marking its second application for Hong Kong stock listings within the year. According to data from ZhiShi Consulting, Goertek Microelectronics is the world’s largest supplier of acoustic sensors, with a global market share of 43%, based on projected sales for 2024.
Behind Goertek are actual controllers Jiang Bin and Hu Shuangmei. The entrepreneurship story of brothers Jiang Bin and Jiang Long is well-known in the industry; they have made their mark in the global billionaire rankings through "Goertek." Brother Jiang Bin even topped the list of "Shandong richest" for some time with family wealth. According to reports from the Financial Weekly, Jiang Bin initially worked as a technician at the Weifang Radio Factory. In the early 1990s, after the factory closed, he utilized the original technology of the factory to partner with a few colleagues to establish a private enterprise, with the primary product still being microphones. Likely, at that time, Jiang Bin did not foresee that the small enterprise established by a few people would ultimately grow into a leading company in the "fruit supply chain."
In 2022, Jiang Bin and Hu Shuangmei ranked 145th on the 2022 Hurun Report with a wealth of 34 billion CNY. However, following Apple’s order cuts in 2022, Goertek’s performance began to decline, and Jiang Long gradually faded from Goertek. According to the 2024 Hurun Global Rich List, Jiang Bin and Hu Shuangmei stand at 1,132nd place with a wealth of 22.5 billion CNY, ranking fifth among Shandong billionaires.
Set against this background, as the company has grown, the brothers Jiang Bin and Jiang Long have already begun a process of reducing their shareholdings since 2012. By May 2015, they had each reduced their holdings six times through the secondary market; Jiang Bin sold a total of 32 million shares, cashing out approximately 1.012 billion CNY; Jiang Long sold a total of 20.3 million shares, cashing out approximately 641 million CNY.
In 2019, Jiang Bin again reduced his holdings multiple times through the secondary market, estimating to cash out around 1 billion CNY. In 2021, he further reduced 33 million shares, realizing approximately 1.76 billion CNY.
Apart from direct reductions, the brothers have also employed other capital operation methods to realize asset liquidation. In 2014 and 2017, Goertek Group, controlled by the two, issued exchangeable bonds twice based on their shares in Goertek, totaling 3.2 billion CNY. This action effectively cashed out the holding value ahead of time through the bond market.
The employee stock ownership plan has also emerged as one of their channels for reduction. Goertek has implemented six phases of employee stock ownership plans, with shares in both the "Home 1" and "Home 3" plans coming from the shares transferred from Jiang Bin. Through this method, Jiang Bin cashed out approximately 1.632 billion CNY again.
Overall, by consolidating the primary channels of direct reduction, the issuance of exchangeable bonds by Goertek Group (wherein the target is Goertek shares), the transfer of shares through employee stock ownership plans, and cash dividend earnings, the Jiang Bin family has achieved total cash inflows exceeding 9.245 billion CNY from Goertek.
On the other hand, since its listing, Goertek has paid a cumulative cash dividend of 3.249 billion CNY to shareholders. The Jiang brothers, directly and through Goertek Group, collectively hold over 30% of the company’s equity, leading to an estimated return from dividends of roughly around 1 billion CNY.
Combining the various means of capital return, including direct share reduction, convertible bond realizations, share transfers in employee stock plans, and cash dividends, the family of Jiang Bin has accumulated cash returns exceeding 10 billion CNY from Goertek.
Despite the failed acquisition, Goertek’s layout in optical technology and sensor spin-offs continues to progress, and the family of the "former Shandong rich" still holds numerous cards in the capital market.
Comments