On December 10, Hygon Information Technology Co.,Ltd. (688041.SH) and Dawning Information Industry Co.,Ltd. (603019.SH) provided further explanations during investor briefings regarding the termination of their asset restructuring plan. Both companies attributed the decision to significant stock price fluctuations since the initial proposal disclosure. However, investors raised concerns over whether timely disclosures were made.
The merger termination was announced late on December 9, halting a six-month-long, industry-shaking consolidation valued at RMB 115.967 billion ($16.3 billion). On December 10, Dawning’s shares hit the daily limit-down, while Hygon opened lower, briefly falling over 5% before recovering to close down 0.36%.
The merger plan, unveiled on May 25, proposed Hygon absorbing Dawning at an exchange ratio of 0.5525:1, with Hygon’s shares priced at RMB 143.46 and Dawning’s at RMB 79.26. The companies cited prolonged negotiations and shifting market conditions as reasons for the termination, stating the deal was no longer feasible under current circumstances.
During the briefing, Hygon’s director and general manager, Sha Chaoqun, explained that significant stock price volatility—driven by domestic and international factors, broader A-share trends, and AI sector dynamics—had altered the deal’s viability. Between June and mid-August, both stocks traded steadily, but from mid-August onward, they surged with heightened volatility.
Data shows Hygon’s shares rose 39.74%, 29.86%, and fell 9.21% in August, September, and October, respectively, while Dawning’s shares climbed 28.34%, 34.75%, and dropped 10.73% over the same period. By September 25, Hygon and Dawning’s closing prices had soared 87% and 58% above the proposed exchange prices, respectively.
Investors questioned why progress updates on August 6, September 5, September 30, and October 29 reiterated “active advancement” of the deal, with no mention of mounting risks. A November 29 announcement maintained this stance, only for the termination to follow 10 days later. Critics highlighted that price volatility had been evident for months, yet disclosures remained unchanged until the abrupt cancellation.
Both firms defended their actions, stating that as of November 29/30, termination was not yet decided. Sha noted December 10 marked the six-month deadline post-initial board resolution, by which conditions for the merger remained unmet.
On the termination date, both companies announced interim cash dividends for 2025: Hygon proposed RMB 0.90 per 10 shares (tax-inclusive), while Dawning offered RMB 0.70 per 10 shares (tax-inclusive).
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