Cross-Border Communication revealed the reason for selling Paton: lack of money!

Cross-border Communication subsequently announced the reason for selling Paton, a "core asset". In fact, many sellers in the industry have guessed that the main reason for this equity transaction is to recover cash to fill the working capital gap and repay debts to improve the company's short-term and long-term debt repayment ability .

According to the disclosure of Cross-border Communication, on the one hand, the company actively expands its main business, and needs sufficient operating funds in marketing promotion, inventory turnover, supply chain construction, etc. On the other hand, in order to seize the opportunity of rapid development of cross-border e-commerce, Cross-border Communication has successively invested in Paton and other high-quality companies in the industry . From 2015 to 2018, it completed the acquisition of 100% of Paton's shares in four times with a total of 1.027 billion yuan, and the operating funds were converted into investment funds.

In order to solve the problem of capital demand, Cross-Border Link raises funds through various means such as issuing corporate bonds, bank loans, and shareholder loans.

In the second half of 2017, in order to supplement the operating capital gap caused by the acquisition of Paton shares and repay the company's loans to improve its financial situation, Cross-border Communication raised a total of 663 million yuan through a private placement of 3-year corporate bonds. In order to repay corporate bonds on schedule and ease liquidity tensions, the company added a total of 550 million yuan in loans to Shenzhen Hi-Tech Investment, of which 120 million yuan of loans matured and were repaid in August 2020, and the remaining 430 million yuan of loans need to be repaid in 2021. Over the years, external financing has gradually increased the company's debt pressure, and its short-term and long-term debt-paying capabilities have shown a downward trend. The company's asset-liability ratio is also higher than that of its peers.

In 2019, Cross-border Communication suffered losses and its profitability declined, which led to financial institutions successively reducing the company's credit line since 2020. Cross-border Communication faces a large liquidity gap and debt repayment pressure . Assuming that Paton is not included in the company's consolidated financial statements and the remaining subsidiaries are simulated for consolidation, there is a significant gap between the company's available monetary funds and working capital needs at the end of 2020. At the end of 2020, Paton's sister company Global Easy Buy had a total of about 1 billion yuan in short-term loans and accounts payable, all of which need to be repaid in the short term or within 2021.

Selling Paton's shares can fill the liquidity gap and repay debts . This is the most important reason why Cross-border Communication wants to sell more than 60% of Paton's shares.

Previously, Cross-border Communication acquired 100% of Paton's equity through capital increase and step-by-step acquisition, with a total investment of 1.027 billion yuan. Paton's net profit in the first half of 2020 was 152 million yuan, and it is expected to exceed 300 million yuan for the whole year. At a price-earnings ratio of 20 times, the valuation is at least 6 billion yuan. Cross-border Communication's sale of Paton's equity will bring very considerable financial returns!

After completing the sale of Paton, Cross-Border E-Commerce will focus on its other two subsidiaries, Global Easy Shopping and Youyi E-Commerce, as its two core assets, and drive both export and import e-commerce.

As for Paton, if the MBO is successful this time, with the support of Xiaomi and Shunwei, it is likely to achieve further leapfrog development in the field of consumer hardware.

There are many transaction entities and details, and overseas companies are also involved, so the actual implementation is quite difficult.

Next, we will continue to pay attention to the progress of this capital operation which has great "out-of-circle" significance!

(Source: Cross-border Black Technology)