With frequent industry consolidation, why did Lianjian Optoelectronics terminate its acquisition of the equity of Hangmei Media?

Lianjian Optoelectronics issued the "Announcement on the Acquisition of 5% Equity Interest in Hangmei Media Group Co., Ltd." on April 8, 2015. The company plans to use its own funds of RMB 150 million to acquire the 5% equity interest in Hangmei Media Group Co., Ltd. held by Beijing Shengshi United Advertising Co., Ltd. (hereinafter referred to as Shengshi United).

On August 25, Lianjian Optoelectronics announced that because Shengshi United chose to transfer its equity in Hangmei Media to third-party investors, the company signed a "dissolution" with Shengshi United and Hangmei Media regarding the acquisition of 5% of Hangmei Media Group Co., Ltd. Equity Announcement> Agreement", the company terminated the equity acquisition transaction, and the Office of the Secretary-General responded that in June this year, Shengshi United signed an "Equity Transfer Agreement" with third-party investors, selling 75% of the equity of Hangmei Advertising for RMB 2.1 billion in cash, and terminated the equity transfer agreement with Lianjian Optoelectronics.

The performance of subsidiaries has made significant contributions

Lianjian Optoelectronics also released its 2015 semi-annual report on the 25th. During the reporting period, the company achieved operating income of 650 million yuan, an increase of 92.48% over the same period last year, and a net profit attributable to ordinary shareholders of the listed company of 91.4236 million yuan, an increase of 194.72% over the same period last year. During the reporting period, Youtuo Public Relations and Easystar were included in the scope of consolidation, which contributed significantly to performance growth.

In September 2014, Lianjian Optoelectronics announced the acquisition of 100% equity of Easystar and Youtuo Public Relations, entering the upstream public relations communication and digital service industry of the advertising chain. The mergers of Easystar and Youtuo Public Relations were completed in March 2015.

It is understood that Easystar is a R&D and manufacturer of LED display screens. Its operating income from March to June 2015 was incorporated into the consolidated statements of Lianjian Optoelectronics. The company's specific revenue was not available in the semi-annual report. Lianjian Optoelectronics stated in the reason for the increase in total revenue that "the main reason is that the company has included Youtuo Public Relations and Easystar into the scope of consolidation since March, which has increased operating income."

The report shows that in the first half of 2015, Lianjian Optoelectronics’ LED display application products achieved sales revenue of 370 million yuan, an increase of 38.63% over the same period last year. The gross profit margin of LED display application products was 35.72%, an increase of 8.05% over the same period last year.

Lianjian Optoelectronics’ public relations and media business revenue in the first half of 2015 was 284 million yuan, an increase of 288.74% over the same period last year. Youtuo Public Relations’ operating revenue from March to June 2015 was incorporated into the company’s consolidated statements. New clients expanded by Youtuo Public Relations in the second quarter of this year include Dell Computer, C’estbon Mineral Water and Tencent Interactive Entertainment.

Industry consolidation is frequent

Lianjian Optoelectronics proposed the development strategy of "Digital Outdoor Media Group" in its 2014 annual report. At present, Lianjian Optoelectronics has formed a software and hardware integrated, digital online and offline integrated communication platform through companies such as Linkage Culture, Timeshare Media, Youtuo Public Relations, and Precision Focus, with public relations services, outdoor media networks, and digital equipment as core modules.

In the 2014 annual report, Lianjian Optoelectronics stated that it will carry out the strategic layout of the "Digital Outdoor Media Group" through "continuous mergers and acquisitions, integrated development".

In addition to Lianjian Optoelectronics, Leyard has expanded into the sales of high-end cultural and performing arts equipment and the rental of LED stage equipment through the acquisition of Guangzhou Lifeng Cultural Technology Co., Ltd. and Beijing Jinli Xiangyicai Technology Co., Ltd. In addition, Ledman Optoelectronics has also started operating Chinese Super League matches.

“It will become a trend for LED display screen manufacturers to transform into cultural media operations in the future.” Han Yun of CCID Consulting’s Semiconductor Industry Research Center said that due to fierce competition and low profit margins in LED downstream displays and other links, LED display screen companies have been exploring the road to transformation. Due to similar application scenarios, listed companies use their financial advantages to transform and enter media operations, which has become an important means for them to improve profitability and increase valuation.

Han Yun said that there are problems such as low-end disordered competition, price wars, and low gross profit margins caused by serious product homogeneity in various LED subdivisions, which have seriously affected the profitability of LED companies and the healthy and sustainable development of the entire industry. Therefore, in order to cope with competition and consolidate existing market positions, mergers and acquisitions, as one of the most convenient and fastest-effective ways to "rise", are favored by LED companies. Compared with previous years, integration and mergers and acquisitions among enterprises are now more frequent.