Hygon and Dawning Terminate Merger Due to "Significant Stock Price Fluctuations"

On December 10, Hygon Information Technology Co., Ltd. (hereinafter referred to as "Hygon") and Dawning Information Industry Co., Ltd. held an investor briefing to announce the termination of their major asset restructuring plan.

The previous evening, both companies issued statements agreeing to terminate the proposed merger, which involved Hygon absorbing Dawning through a share swap arrangement with Dawning’s A-shareholders, along with a concurrent fundraising effort.

Regarding the termination, the companies cited significant changes in market conditions since the initial planning stages. They stated that the prolonged evaluation of the restructuring plan, coupled with the complexity of the transaction involving multiple stakeholders, made the conditions for proceeding unfavorable. The decision was made after careful consideration to protect the long-term interests of shareholders.

During the briefing, investors repeatedly questioned the specifics of the "market conditions" mentioned. In response, both companies acknowledged that their stock prices had experienced substantial fluctuations since the restructuring plan was disclosed.

Legal expert Wang Zhibin commented that while significant stock price volatility could justify terminating a merger to avoid unfair pricing, companies must ensure compliance with regulatory procedures. Boards of directors, independent directors, and intermediaries must thoroughly assess whether the fluctuations meet predefined termination criteria. Additionally, potential liabilities from broken commitments or exclusivity agreements should be evaluated to safeguard minority shareholders' rights.

Brand strategy consultant Zhan Junhao noted that the termination reflects a misalignment between market valuations and corporate capital planning. He suggested companies mitigate such risks by implementing dynamic valuation mechanisms, strengthening insider information controls, and improving phased disclosures to manage market expectations.

Both Hygon and Dawning emphasized that the termination would not affect future collaboration.

Sha Chaoqun, Hygon’s director and general manager, stated that the two companies operate independently but can still collaborate across the computing supply chain, from chip design to infrastructure services.

Li Jun, Dawning’s director and general manager, reaffirmed the company’s commitment to integrating domestic computing resources, aiming for a full-stack industrial layout spanning hardware, software, and data solutions.