The 900 million yuan acquisition previously faced opposition from the board of directors. Xin Dazheng responded to the inquiry letter: the transaction's synergistic effects are achievable.

Independent property management company Xinda Zheng increases its commitment to its IFM (integrated facilities management) business, with the latest developments.

Last September, Xinda Zheng disclosed a proposed acquisition of Jiaxin Liheng Facilities Management (Shanghai) Co., Ltd. (hereinafter “Jiaxin Liheng”). Four months later, on January 23 this year, the company issued a restructuring proposal, planning to acquire 75.1521% of the equity of Jiaxin Liheng for a total consideration of RMB 917 million through a combination of share issuance and cash payment.

Of note is that Xinda Zheng itself faces operational pressure described as “increasing revenue but not increasing profit.” Data show that from 2022 to 2024, the company’s revenue rose from RMB 2.598 billion to RMB 3.387 billion, while net profit fell from RMB 186 million to RMB 114 million. This acquisition of Jiaxin Liheng is also seen by the market as a key move for the company to enter the IFM track.

However, because the acquisition proposal received dissenting votes and abstentions during the board of directors’ deliberation stage, the transaction has drawn regulatory attention.

Late on April 2, Xinda Zheng released an announcement providing a detailed response to the letter of inquiry from the Shenzhen Stock Exchange. It addressed core issues including transaction synergy effects, integration risks, the target’s operating situation, and the fact that no performance commitments were set. Xinda Zheng emphasized that its main business focuses on public building property management in the Southwest region. Jiaxin Liheng, the target company, is deeply focused on industrial and commercial clients in the East China region. The two are highly complementary in terms of market positioning and customer structure.

**　　Xinda Zheng: The customer types and business regions of the transaction counterparties are highly complementary **

On January 23, when the board of directors reviewed the transaction proposal, Xinda Zheng director Wang Rong cast a dissenting vote, while independent director Liang Shunan abstained. Both said they found it difficult to judge the feasibility of the synergy effects of this transaction. The Shenzhen Stock Exchange’s letter of inquiry also listed the feasibility of synergy effects as the top priority question.

In its response, Xinda Zheng explained that, regarding the customer structure, in 2024 over 65% of the company’s revenue came from government public-building clients, while in the same period over 83% of Jiaxin Liheng’s revenue came from industrial and commercial clients; the two differ significantly in strategic positioning and customer groups. In terms of regional layout, Xinda Zheng’s main business base is in the Southwest region, where the income contribution ratio in 2024 was 53.87%; Jiaxin Liheng, by contrast, is centered on the East China region, with revenue contribution ratio reaching 55.65%, and it also has business arrangements in Hong Kong.

Xinda Zheng believes that the two sides’ high complementarity in customers and regions will help each other introduce business resources and expand new growth opportunities. After the transaction is completed, the listed company will be able to absorb Jiaxin Liheng’s capabilities in areas such as industry-tailored services and green energy management, further enhancing its level of professional services in the IFM field.

“There are differences between the listed company and the target company in the types of target customers and the distribution of business regions. Through this transaction, both sides will be able to introduce business opportunities that fit each company’s brand track; at the same time, through this transaction, both sides can strengthen business capabilities in different fields, improve management efficiency, and better serve existing customers. The synergy effects of this transaction are feasible.” Xinda Zheng said.

Regarding the integration and control issues that drew regulatory attention, Xinda Zheng disclosed that after the transaction is completed, the company will achieve control through methods such as appointing two-thirds or more of the seats on the target company’s board of directors and appointing a chairman; at the same time, it will incorporate Jiaxin Liheng into the group’s financial internal control system, promoting deep integration in terms of personnel, business, organizational structure, and so on to reduce integration risks.

**　　The target’s gross margin continues to decline, and the transaction sets no performance commitments, drawing attention **

Financial data show that during the reporting period, Jiaxin Liheng’s main business revenue maintained growth. In 2023 and 2024, it respectively achieved RMB 2.841 billion and RMB 2.975 billion, and in the first eight months of 2025 it achieved RMB 2.033 billion. After excluding the impact of share-based payment expenses, net profit for the same period was respectively RMB 105 million, RMB 117 million, and RMB 79.0905 million.

Notably, during the above period, Jiaxin Liheng’s gross margin continued to decline, at 13.11%, 12.70%, and 11.62% respectively. Xinda Zheng explained that the decline in gross margin was mainly affected by factors such as intensified industry competition and the steady year-by-year increase in rigid labor costs.

Another market focus is that the major acquisition totaling RMB 917 million did not set performance commitments. In response, Xinda Zheng said that the transaction counterparty is not the controlling shareholder or an affiliate of the listed company, and the transaction does not lead to a change in the company’s controlling rights. The two sides may, based on market-oriented principles, independently negotiate whether to set performance compensation. The related arrangements comply with the provisions of the《Administrative Measures for the Major Asset Restructuring of Listed Companies》.

As an alternative safeguard, the transaction plan includes agreements on a share lock-up period and non-compete restrictions.

The announcement shows that the share lock-up period for some employee shareholding platforms’ transaction counterparties is up to 36 months. Among the natural-person partners in the aforementioned shareholding platforms, many are core employees of the target company. They need to sign non-compete restriction agreements, with obligations covering both the period during which they hold equity in the target and for 2 years after they no longer hold shares.

Xinda Zheng believes that the above arrangements can deeply bind the interests of the core team with the listed company’s long-term value, which is beneficial for safeguarding the rights and interests of the listed company and its small and medium-sized investors.

（Source: Economic Daily News）