Caixin
Oct 19, 2021 05:14 AM
FINANCE

Exclusive: Seven Investors in Unigroup Takeover Talks

Representatives of more than 400 creditors participated in the meeting, claiming more than 100 billion yuan ($15.5 billion) of debts
Representatives of more than 400 creditors participated in the meeting, claiming more than 100 billion yuan ($15.5 billion) of debts

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 resolve massive debt woes is accelerating. Unigroup, majority owned by Tsinghua University in Beijing, held its first meeting with creditors online to review its debt obligations, the company said in a statement Monday on its official social media account.

Representatives of more than 400 creditors participated in the meeting, claiming more than 100 billion yuan ($15.5 billion) of debts, an attendee told Caixin. Although Unigroup’s businesses are generating less than 100 billion yuan in annual revenue, the company still has the capacity to repay the debts, the person said.

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

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Government-appointed administrators are evaluating restructuring proposals by seven strategic investors that are interested in taking over the company, Unigroup said in its statement.

Unigroup didn’t identify the investors, but Caixin learned that they include the five candidates shortlisted in June plus two new participants — leading state-owned electronics producer China Electronics Corp. and a consortium formed by Shanghai Summitview High-Tech Venture Capital Management Co. Ltd. and Shanghai Guosheng Group.

The five candidates shortlisted 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 were hand-picked from 14 candidates by a working team sent by the Beijing municipal government to Unigroup to lead the restructuring. All five companies agreed to take over Unigroup as a whole and offered between 50 billion yuan and 60 billion yuan for the assets.

The Monday meeting attendee said the Unigroup reorganization is moving in the direction of overall takeover by new investors while also resolving the debts.

“The seven potential investors are all long-term industrial investors, meaning they may help the company win 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 income quickly in an industry famous for huge costs of entry and long payback periods. Since late 2020, the company has defaulted on a raft of bonds amid an escalating capital crunch.

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Cover Story: Rescuing China’s Would-Be Chipmaking Champion

According to company filings, Unigroup had 296.6 billion yuan ($46 billion) of total assets as of the end of June 2020. Liabilities amounted 202.9 billion yuan, with nearly 80 billion yuan maturing within a year.

A court in Beijing ordered Unigroup’s creditors to file claims by Oct. 8. Under China’s bankruptcy law, the company will have until April 2022 to discuss and settle on a reorganization plan with potential strategic investors. Unigroup is expected to attempt to reach an agreement with creditors for some of its debt to be forgiven and for repayment deadlines to be delayed, while strategic investors will be invited to provide new funds. If the company, its creditors and potential strategic investors fail to reach agreement, the company could be liquidated.

Regulators have signaled a preference for investors that are willing to take over Unigroup’s major assets as a whole. According to company filings, as of the end of June 2020, Unigroup had 286 subsidiaries. The most valuable assets include Shenzhen-listed cloud unit Tsinghua Unisplendour, security chipmaker Unigroup Guoxin Microelectronics Co., mobile phone chipmaker Unisoc and Yangtze Memory Technologies, all leading players in segments of the semiconductor industry.

But it will also make the rescue of Unigroup a challenging task because of the massive assets and complicated debts involved, analysts said.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (hello@caixin.com)

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