Exclusive: Seven investors in Unigroup buyout talks

Tsinghua Unigroup Co. Ltd. is in talks with seven strategic investors, including state-owned China Electronics Corp. and e-commerce giant Alibaba Group, Caixin learned.

The talks suggest that the restructuring of the once high-flying chipmaking conglomerate to solve massive debt problems is gaining momentum. Unigroup, majority-owned by Tsinghua University in Beijing, has held its first online meeting with its creditors to review its debts, the company said on Monday in a statement posted on its official social media account.

Representatives of more than 400 creditors attended the meeting, claiming more than 100 billion yuan ($ 15.5 billion) in debt, a participant told Caixin. Although Unigroup’s activities generate less than 100 billion yuan in annual revenue, the company still has the capacity to repay its debts, the person said.

“The convening of the creditors meeting indicated that Unigroup’s restructuring is entering a key step that will confirm strategic investors as soon as possible to help revive its business,” Unigroup said in the statement.

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Government-appointed directors are evaluating restructuring proposals from seven strategic investors interested in buying the company, Unigroup said in its statement.

Unigroup did not identify the investors, but Caixin learned that they included the five shortlisted candidates in June as well as two new entrants – the main producer of state-owned electronics. China Electronics Corp. and a consortium formed by Shanghai Summitview High-Tech Venture Capital Management Co. Ltd. and Shanghai Guosheng Group.

The five candidates pre-selected in June are Guangdong Hengjian Investment Holding Co. Ltd., Beijing Electronic Holding Co. Ltd., Beijing Jianguang Asset Management Co. Ltd., Wuxi Industry Development Group Co. Ltd. and Alibaba Group. The five candidates were handpicked from 14 candidates by a task force sent by the Beijing municipal government to Unigroup to lead the restructuring. The five companies agreed to take over Unigroup as a whole and offered between 50 and 60 billion yuan for the assets.

The participant at Monday’s meeting said the Unigroup reorganization was in line with a global takeover by new investors while resolving debts.

“The seven potential investors are all long-term industrial investors, which means they can help the company gain support from bank creditors,” the person said.

Unigroup was once at the forefront of China’s drive to develop a domestic semiconductor industry. The company embarked on a series of acquisitions and investments in the capital-intensive integrated circuit sector between 2013 and 2019, forging partnerships with Intel Corp. and HP Inc. and emerging as a major player. But it failed to generate quick income in an industry known for its huge entry costs and long paybacks. Since the end of 2020, the company has defaulted on a series of bonds amid tightening capital.

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According to documents filed by the company, Unigroup held 296.6 billion yuan ($ 46 billion) in total assets at the end of June 2020. Liabilities stood at 202.9 billion yuan, with nearly 80 billion yuan. yuan due within a year.

A Beijing court ordered Unigroup’s creditors to file claims by October 8. Under China’s bankruptcy law, the company will have until April 2022 to discuss and settle a reorganization plan with potential strategic investors. Unigroup should try to reach an agreement with the creditors for the cancellation of part of its debt and the postponement of repayment deadlines, while strategic investors will be invited to provide new funds. If the company, its creditors and potential strategic investors cannot come to an agreement, the company could be liquidated.

Regulators have expressed a preference for investors keen to take over all of Unigroup’s major assets. According to documents filed by the companies, at the end of June 2020, Unigroup had 286 subsidiaries. The most valuable assets include Tsinghua Unisplendour, the Shenzhen-listed cloud unit, security chipmaker Unigroup Guoxin Microelectronics Co., cellphone chipmaker Unisoc, and Yangtze Memory Technologies, all leading players in segments of the semiconductor industry.

But it will also make rescuing Unigroup a difficult task due to the massive assets and complicated debt involved, analysts said.

Contact reporter Han Wei ([email protected]) and editor Bob Simison ([email protected])

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