Having survived oversupply in the LED industry, and endured a harsh winter, listed LED manufacturers have been leading the way in mergers and acquisitions in 2015. Listed companies mergers grew significantly this year to become a major trend on the market. Listed companies acquisitions and trade value have grown exponentially, reflecting features of listed companies merging with smaller companies. More than 37 merger deals were negotiated as of October 2015, and have continued to grow.

Among the merger deals, some succeeded with flying colors, while others failed miserably. The LED industry which is favored by investors, deserves an in-depth review of the failed merger cases in the Chinese market this year.

Top 10 mergers and acquisitions terminated in the LED industry in 2015:

1) Kingsun Opto halts acquisition of Shenzhen United and Heading Technology Development (SUHTD)

Kingsun Opto announced on Feb. 5, 2015 that it terminated the acquisition of SUHTD, and the two companies signed an agreement to call off the deal. Under the original share purchase agreement, Kingsun was to acquire a 51% stake in Juichang Technology.

According to the statement released, Kingsun Opto signed an agreement to acquire a 51% stake in SUHTD on Dec. 9, 2014. Although, the two companies negotiated several times, they were unable to reach an agreement on the acquisition terms, and the two companies decided to cancel the deal.

2) Roshow Technology puts brakes on large investment restructure

Sapphire maker Roshow Technology stopped trading on the stock market starting from Dec. 1, 2014 till June 29, 2015, due to an important business plan. Following the announcement, Roshow Technology and the company of interest were in talks, but the two companies failed to reach an agreement. After numerous negotiation attempts, the two companies decided to abort the investment and restructure deal. The company has continued to halt share trade on the stock market.

3) Moso terminates restructure plan

Chinese LED driver manufacturer Moso Power announced on May 20 this year that it was planning an important asset restructure, which involved issuing private placement, and that it would continue to halt trade on the stock market. The company and financial brokers had thoroughly analyzed and discussed the details, and after several negotiations the two parties arrived to the conclusion that restructure conditions were not ripe yet. After thoughtful consideration, the company decided to terminate the investment restructure, and both parties signed an agreement to withdraw from the merge.

4) Unilumin puts US $300 million oversea acquisition deal on hold

In a statement released on July 14, 2015, Unilumin announced during the period of its halted trade on the bourse, the company had been carefully evaluating, observing and communicating with the company of interest. Since the company it intended to absorb was an international company, evaluations indicated the investment process would be relatively complicated. The two companies would need to overcome cultural differences after the merge, the administrative protocols involved were also burdensome. The administrative review process could take a long period, and plagued with many unforeseen risks, which could affect the effectiveness of the contracts.

Due to the above listed reasons, and meticulous evaluations, the company believed the restructure conditions were immature. The company eventually terminated the US $300 million plan to acquire an international company to reduce company management risks and costs, while protecting shareholder rights.

5)　Lianovation halts acquisition of SAT Infrared Technology (SATIR) shares

Lianovation announced the two parties were unable to concur certain details of its agreement, and that the company was terminating the share acquisition framework agreement it signed with SATIR.

Liantronic, SATIR and an automated technology company signed a framework agreement to transfer shares and increase investments. The agreement stated Liantronic will not invest more than RMB 150 million (US $23.15 million) to acquire a 20% stake in SATIR. The final transaction value was based on a review of the negotiation results. Additionally, the company will spend no more than RMB 150 million in cash to finance the acquisition of 16.67% SATIR shares, and will acquire in total 33.34% of company shares. After the two companies achieve their targeted performance and other goals, SATIR will acquire the remaining company shares.

The company claims after signing the framework agreement, the new agreement requires the two companies to follow conditions listed under the signed agreement, and promote related works. Following implementations indicate the company and negotiators were unable to reach an agreement, and after the two parties negotiated the issue, they decided to terminate the “framework agreement.”

6) Liantronics terminates acquisition of Airmedia

In an earlier company statement released on Aug. 24, 2015, Liantronics announced it cancelled the acquisition of 5% stake in Airmedia. The company revealed its plans of investing in the company on April 8, 2015, and was going to acquire the shares. The company planned to finance the RMB 150 million deal to purchase Beijing Union Media Operators 5% stake in Airmedia. Since Beijing Union Media transferred its shares in Airmedia to a third party investor, the company signed a deal with Beijing Union Media Operators to revoke the acquisition agreement.

7) Foshan Lighting repeals merge with Bain Capital

In a company announcement on Sept. 8, 2015, Foshan Lighting announced it had partnered Bain Capital on a very large restructure project. The company then halted trading on China’s A-stock and B-stock starting from Aug. 26, 2015. During the halted trading period, the companies were actively communicating to promote related works, but due to the complicated situation the companies were unable to reach an agreement, and called off the deal.

8) LianTronics ends investment plan in Kongu Yiyi

Liantronics announced on Nov. 12, 2015 that the companies could not agree on the risk control articles in the contract, Jiangxi Yiyi Investment Consultant Company (江西懿懿投资咨询有限公司) framework agreement.

The company would invest RMB 25.50 million in Jiangxi Yiyi Investment Consultant in the form of registered capital, which amounted 51% of the company’s registered capital, which would make it a subsidiary.

9) Hongliopto terminates acquisition of Wisdom GPS

Hongliopto announced on Aug. 31, 2015, it terminated the acquisition Shenzhen Wisdom GPS.

Hongliopto planned to acquire the company since July 18, 2015, and announced on cnifnif website that it would acquire 18.57 million shares from Wisdom GPS using RMB 195 million in cash. Moreover, it would use RMB 65 million to raise its shares in Wisdom GPS to 5.57 million shares. Based on the company statement, if the transaction goes smoothly, the company would acquire 36.58% company shares.

During the negotiation period, Hongliopto investigated Wisdom GPS, which revealed the latter company did not meet the company’s investment expectations. Based on the two companies investment intention agreement, the two companies were unable to officially sign an acquisition agreement as of Aug. 31, 2015. The company intended to automatically end the agreement.

10) Aoto Electronics forced to terminate asset restructure

Aoto Electronics announced on Dec. 24, 2015, since its shares prices fell lower than its estimated share issuance value, it had to halt company restructure and employee stock option plans.

Aoto Electronics stated its share prices were lower than the original price it estimated for restructured company asset acquisition and financing. Following the restructure, and integration there will still be differences that the companies will have difficulty agreeing on. Hence, the company filed an application to China’s Security Review Council to revoke the acquisition application papers.

The above ten acquisition termination cases could happen in any industry, the main reasons nearly all involve discrepancies in the evaluation of the company value, and financial situations. Uncertainties in unprofitability, changes in government policies that have blocked the deals from being approved, and unforeseen variables in the review process, which has made it more difficult. Other issues include suspected illegal audit and review processes, acquiring companies at a premium price, and uncertainties profitability outlook. It is also possible that listed companies lack clear market positioning. All these can happen when companies revoke acquisition agreements.

(Author: Skavy Cheng, Editor, LEDinsidehttp:// Editor and Translator: Judy Lin, Chief Editor, LEDinside)