Haite Group's related mergers and acquisitions face a "four-year tug-of-war"! The plan keeps changing, and the valuation of the target asset has shrunk by 60%!

As of March this year, Hainan Highway Group’s monthly announcements of “restructuring progress,” familiar with the “formula,” have continued for a year and a half: the major asset restructuring is still ongoing, but there are certain obstacles in advancing the transaction, and there is significant uncertainty about whether it can ultimately be completed.

Since the official announcement of the acquisition of related party assets in May 2022, Hainan Highway Group’s restructuring plan has undergone three significant modifications in nearly four years, with the valuation of the target assets halved, core terms shrinking step by step, payment methods undergoing substantial changes, and stability lost, while the timeline for the restructuring to take effect has yet to be seen.

As regulatory authorities continue to intensify the crackdown on “deceptive restructurings,” can this restructuring drama, which has gradually fallen into a stalemate, find a way out smoothly?

The “protracted battle” of restructuring has begun.

Hainan Highway Group’s main business includes passenger transportation, bus station operations, and comprehensive automotive services. It was listed on the Shanghai Stock Exchange in July 2016. In recent years, as the national high-speed rail network rapidly expanded and the number of private cars surged, the demand for medium- and long-distance passenger transportation has declined, impacting the company’s main business, which has seen its peak revenue since its listing in 2018.

From 2020 to 2024, Hainan Highway Group reported a continuous loss in net profit attributable to non-recurring items for five consecutive years, with the latest performance forecast indicating that the company expects to lose between 40 million to 80 million yuan in net profit for 2025, and a loss of 48 million to 96 million yuan in net profit attributable to non-recurring items. Meanwhile, the company’s asset-liability ratio has been increasing year by year, reaching 69.17% in the third quarter of 2025.

Faced with the ongoing decline in its main business, Hainan Highway Group has turned its attention to duty-free business. In 2020, the Hainan Free Trade Port construction plan was introduced, and the duty-free concept became one of the hottest topics in the capital market. In the same year, the actual controller of Hainan Highway Group, the Hainan Provincial State-owned Assets Supervision and Administration Commission, transferred its holdings in Hainan Highway Holdings to Hainan Tourism Investment, which holds a duty-free license, becoming the indirect controlling shareholder of the listed company, currently holding 42.5% indirectly.

The dual expectations of “duty-free + restructuring” quickly ignited the company’s stock price. In August 2020, Hainan Highway Group’s stock price soared to a historical high of 68.22 yuan per share, with an increase of over 500% within two months.

In May 2022, Hainan Highway Group officially suspended trading to plan a major asset restructuring, intending to acquire 100% equity of Hainan Duty Free from its indirect controlling shareholder, Hainan Tourism Investment, at a price of 5 billion 2 million yuan through the issuance of shares and cash payment, while concurrently raising no more than 1.8 billion yuan in supporting funds.

The favorable restructuring news once again pushed the stock price higher, and with the support of the duty-free concept, Hainan Highway Group’s stock price hit 11 consecutive daily limits after resuming trading, soaring from 12.02 yuan per share to a peak of 45.78 yuan per share in just one month, an increase of 280%.

However, following the stock price frenzy, Hainan Highway Group’s restructuring plan fell into a long tug-of-war.

Multiple modifications and shrinking valuations

Since the initial announcement to acquire Hainan Duty Free, Hainan Highway Group’s restructuring process has continued for nearly four years, with the restructuring plan undergoing multiple modifications, several suspensions, and numerous rounds of regulatory inquiries, leaving its future still full of uncertainty.

In April 2023, Hainan Highway Group first adjusted the transaction plan, lowering the transaction price from 5 billion 2 million yuan to 4.08 billion yuan and reducing the amount of supporting fundraising from no more than 1.8 billion yuan to 1.4 billion yuan, but the restructuring was halted due to expired financial data.

In March 2024, Hainan Highway Group restarted the restructuring plan and announced significant adjustments to the restructuring proposal: the transaction price was further reduced to 2.037 billion yuan, a nearly 60% decrease from the initial valuation; the size of the supporting financing was compressed to 738 million yuan, and performance commitments were significantly reduced. Hainan Highway Group stated that the main reason for this adjustment was the target company’s performance falling short of expectations.

However, just six months later, in September 2024, Hainan Highway Group made another significant adjustment to the restructuring proposal, changing the original plan of “issuing shares and paying cash to purchase 100% equity of Hainan Duty Free” to “acquiring control of Hainan Duty Free after the divestiture of the Huating project through cash and/or asset payment.” The new plan canceled the arrangements for share issuance and supporting financing, blurred the equity acquisition ratio, and did not mention key terms such as performance commitments.

Subsequently, Hainan Highway Group issued monthly progress announcements regarding the restructuring process but has not made any substantial progress. The company’s latest announcement stated, “Due to factors such as intense competition in the domestic duty-free market and a slowdown in consumer demand, it is expected that the performance of the target company, excluding the Huating project, may see a significant decline in 2025. There are certain obstacles in advancing this restructuring, and there is significant uncertainty regarding whether it can ultimately be completed.”

From “issuance of shares + cash acquisition + supporting fundraising” to “cash/assets” acquisition, the acquisition plan has been significantly simplified, which also tests the listed company’s payment ability. The third-quarter report for 2025 shows that Hainan Highway Group has cash and cash equivalents of 281 million yuan, which is over 1.7 billion yuan short compared to the last announced valuation of Hainan Duty Free; on the other hand, the company’s interest-bearing liabilities exceed 1 billion yuan, and the high asset-liability ratio further exacerbates the financing pressure.

“Based on the current situation, the fastest way for mergers and acquisitions to complete a simplified procedure can be done within three months, while the average time for normal procedures is 6 to 12 months, constituting an average of 12 to 18 months for restructuring and listing. For particularly complex cases, the merger cycle may exceed two years,” said Wang Jie, a senior partner at Dacheng Law Firm, to the Securities Times. Hainan Highway Group’s restructuring has already exceeded this range.

Numerous challenges in completing the restructuring

Liu Zhigeng, a researcher at the Suzhou Gang Management Accounting and Auditing Research Institute, stated that the long duration of related mergers and acquisitions usually stems from four major reasons: first, the target’s performance falling short of expectations; second, the stalemate in the game between valuation and performance commitments; third, increasingly stringent regulatory scrutiny; and fourth, difficulties in coordinating the interests of all parties involved in the transaction.

Previously, regulatory authorities conducted multiple rounds of inquiries regarding Hainan Highway Group’s restructuring plan, focusing on key issues such as inflated valuations, funding sources, and performance commitments. The actual performance of the target assets has been severely disconnected from expectations, leading the market to question the existence of significant “bubbles” in its valuation.

In the initial acquisition proposal in 2022, the 100% equity of Hainan Duty Free was valued at 5 billion 2 million yuan, with an appreciation rate exceeding 13 times. This proposal also promised that the net profit of the target company would not be less than 116 million yuan, 358 million yuan, and 538 million yuan from 2022 to 2024, respectively. However, in 2021, Hainan Duty Free reported a net profit attributable to the parent of -24.4689 million yuan, indicating that it had not yet achieved profitability.

The high valuation of Hainan Duty Free was based on the optimistic expectations of the listed company regarding its performance growth. Approximately 80% of Hainan Duty Free’s revenue comes from offshore duty-free business, and the Hainan Duty Free City, established in December 2020, is its core business platform. The listed company initially predicted that Hainan Duty Free’s revenue from duty-free business in 2022 and 2023 would grow by over 50% annually.

However, from the actual situation, starting in 2022, the sales volume of offshore duty-free in Hainan Province, after two years of explosive growth, has undergone significant adjustments, compounded by increasingly fierce market competition, resulting in Hainan Duty Free’s performance falling significantly short of expectations. In 2022 and 2023, its net profit attributable to the parent was only 61 million yuan and 139 million yuan, achieving only 52.58% and 38.83% of the performance commitment value, respectively. According to the information disclosed by the company, the target company’s performance is expected to decline significantly in 2024 and 2025.

At the corporate governance level, since the initiation of the restructuring, Hainan Highway Group’s core management team has seen frequent changes. In January 2024, former chairman Liu Hairong resigned due to a job transfer, and in June 2025, successor chairman Feng Xianyang resigned, with Fu Ren’en taking over the position. In November 2025, general manager Ma Chao resigned and no longer held any position in the company, with the general manager position temporarily held by Fu Ren’en. The frequent turbulence at the top is bound to affect the continuity of restructuring decisions.

“Hainan Highway Group has made multiple significant adjustments to the restructuring plan during its acquisition of Hainan Duty Free, reflecting that the core foundation of the transaction has already been shaken. It is a passive compromise by the listed company under pressure from underperforming target performance, industry decline, and regulatory pressure, rather than proactive plan optimization. Essentially, it is a shift from ‘strategic upgrade’ to ‘damage control for survival,’” Liu Zhigeng analyzed.

Regarding the obstacles to advancing the restructuring, the basis for plan adjustments, and funding gaps, the reporter sought an interview with Hainan Highway Group, but as of the time of publication, no response was received.

The risks of “difficult mergers” need to be heeded.

Since the implementation of the “six guidelines for mergers and acquisitions,” the review process for restructuring in A-shares has continued to optimize, significantly improving the efficiency of mergers and acquisitions for listed companies. The reporter’s statistics show that since 2025, for major asset restructurings initiated by listed companies as buyers, the average time from initial disclosure to completion of the restructuring is 334 days, with the shortest taking less than two months and the longest about two years.

In contrast, Hainan Highway Group’s restructuring process has been prolonged, and the frequent modifications of the core plan are far from normal, yet not an isolated case. Companies with excessively long restructuring cycles often exhibit characteristics of sluggish main businesses and heightened speculative sentiment, and most end up failing in their restructuring efforts.

For example, Zhongyida initiated a 10 billion yuan acquisition in May 2021, intending to acquire 100% of Wengfu Group. This restructuring proposal underwent multiple rounds of regulatory inquiries and was terminated in February 2024 after nearly three years.

Liu Zhigeng believes that the prolonged restructuring cycle negatively impacts listed companies in five major ways: First, the listed company misses the window for transformation, leading to the main business not recovering and new businesses not being established; second, investor expectations are repeatedly frustrated, leading to long-term pressure on stock prices and severely weakened financing capabilities; third, the fairness of the transaction is called into question, with substantial modifications and concessions to core terms of the transaction possibly raising market speculation about whether the asset pricing is fair or if there is profit transfer; fourth, inefficient communication with regulators exposes shortcomings in corporate governance; and fifth, the continuous depreciation of the target assets may ultimately result in “negative assets” being injected into the listed company, thereby increasing the financial burden on the listed company and facing the risk of “being taken over.”

Wang Jie stated that multiple significant adjustments to the restructuring plan are not entirely negative; however, excessive frequency and magnitude usually indicate insufficient prior verification, intense competition, or biased interests. In his view, frequent adjustments essentially extend the cycle, amplify uncertainties, and weaken market trust, ultimately significantly increasing the failure rate and compliance risks of the restructuring, and long-term damaging the value of listed companies and the rights of small and medium shareholders. “Regulators and the market should focus on distinguishing whether it is a compliance correction or arbitrary adjustment; whether it is to protect the listed company or to benefit specific parties.”

“To determine whether the plan is a genuine adjustment or ‘deceptive restructuring,’ one should observe whether the direction of the adjustment is converging or diverging. Genuine restructuring modifications typically narrow the scope of the target, set more reasonable pricing, and rectify compliance flaws, ultimately converging the plan, while ‘deceptive restructuring’ tends to become increasingly chaotic, with the target fluctuating widely, valuation jumping repeatedly, performance commitments being inconsistent, and transaction structures frequently overturned, with each announcement labeled as a ‘significant adjustment’ but never resolving the key issues,” Wang Jie said.