After receiving an inquiry from the exchange regarding its plan to acquire a loss-making travel agency, Shanghai Xinnanyang Only Education & Technology Co., Ltd. (SH600661, stock price: ¥10.74, market cap: ¥3.078 billion) disclosed a detailed 30-page reply.
In late October, Only Education announced its intention to acquire a 100% stake in Shanghai Leyou Yutu International Travel Agency Co., Ltd. (Shanghai Leyou) for ¥38 million in cash. Despite Shanghai Leyou’s negative net assets, the valuation premium reached 521.71%. Notably, four directors abstained during the board vote—an unusual occurrence that drew significant attention to the deal.
In its November 19 reply, Only Education justified the acquisition as a strategic move to enter the "silver economy" sector while leveraging its core education and training business to develop a second growth curve in cultural tourism. The company also addressed concerns about the target’s financial projections, including a four-year cumulative revenue target of at least ¥480 million.
**Boardroom Divisions Over Strategic Fit** The acquisition sparked rare dissent within Only Education’s board. At the first meeting of the 12th board, four out of 11 directors abstained. Non-independent director Zhang Wenhao expressed skepticism, stating the deal lacked synergy with the core education business and cited past unsuccessful acquisitions. Independent directors Mao Zhenhua and Gao Feng raised concerns about unclear project benefits, though they later revised their stance after reviewing supplementary materials.
**Strategic Rationale: Traffic and Licensing** Only Education emphasized two key advantages: 1. **Traffic Reuse**: The company’s education business serves grandparents who accompany students, creating a potential customer base for senior-focused travel services. 2. **Licensing**: Only Education lacks an international travel license, which requires two years of domestic operations. Acquiring Shanghai Leyou provides immediate access to this license, enabling the company to expand into parent-child and study tours.
**Valuation and Financial Concerns** As of June 30, 2025, Shanghai Leyou reported negative net assets of ¥9.1295 million. However, a discounted cash flow (DCF) valuation pegged the company at ¥38.5 million—a 521.71% premium. Only Education defended the methodology, citing intangible assets like stable client relationships and operational efficiency not captured in book value.
The seller, Shanghai Xianghong Cultural Tourism Development Group, committed to a stringent performance guarantee: ¥500 million cumulative net profit from 2025–2028. Yet, Shanghai Leyou posted losses of ¥435,800 in 2024 and ¥567,200 in H1 2025, raising doubts about its rapid turnaround. Only Education projected profitability by 2026, contingent on securing a 4A travel agency rating and expanding self-operated products and store networks.
**Payment Structure and Debt Clearance** Of the ¥38 million transaction, ¥35 million (92%) will be paid upfront to settle Shanghai Xianghong’s ¥32.91 million debt to Shanghai Leyou. Only Education assured regulators it would oversee fund flows to ensure no post-acquisition financial entanglements.
*Disclaimer: This content is for informational purposes only and does not constitute investment advice.*
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