Click to read the original article for details. On June 24, COFCO Packaging (00906) announced that it had received a share buyback notice from Zhi Shou, one of JDB's shareholders, on June 21, 2019. According to the announcement, Zhi Shou applied to the Hong Kong International Arbitration Centre to buy back COFCO Packaging's 30.58% stake in Qingyuan JDB Herbal, and accordingly expressed willingness to return to COFCO Packaging the total amount of cash and in-kind contributions it had made to Qingyuan JDB Herbal (plus returns calculated at an annual interest rate of 10% from the date of the relevant contributions). If COFCO Packaging agrees to this transaction, it will completely withdraw from its equity investment in JDB. However, industry analysts believe that the two sides are still in a game of strategy, and the outcome is still uncertain. Stimulated by the above news, COFCO Packaging's stock opened flat and then surged nearly 6% in early trading. COFCO Packaging stated in the announcement that its management will seek legal advice on the matter to achieve the most favorable solution for its shareholders. COFCO Packaging's involvement in JDB began more than a year ago, when JDB was going through a difficult period, with layoffs, executive departures, factory shutdowns, and other negative news. COFCO Packaging acquired a 30.58% stake in JDB's core factory for only 2 billion yuan, and part of the equity was paid in kind with aluminum two-piece beverage cans produced by the company. Our reporter has previously reported that in October 2017, COFCO Packaging officially invested in JDB, choosing the production company of JDB's concentrate, named "Qingyuan JDB Herbal." COFCO Packaging invested in cash, exchanging 2 billion yuan for a 30.58% stake; Wanglaoji Company (the holder of the JDB trademark) injected its trademark as capital, valued at 3 billion yuan, thereby obtaining a 45.87% stake in Qingyuan JDB Herbal, while the original 100% shareholder, Zhi Shou Limited, saw its stake reduced to 23.55%. With a strong backer, COFCO Packaging got a bargain in this transaction, but for JDB, it was more about finding COFCO as a patron. However, compared with the booming competitor Wanglaoji, JDB was clearly not willing to "sell cheaply" in this deal. After the transaction was reached, the injection of JDB's brand assets was delayed, and eventually COFCO Packaging took JDB to court. In fact, COFCO Packaging has long been JDB's can supplier. In July 2018, COFCO Packaging raised objections to the cooperation, and the relationship between the two sides began to crack. On July 6, 2018, COFCO Packaging announced that it had filed an arbitration application with the Hong Kong International Arbitration Centre against Wanglaoji Company, Zhi Shou Limited (a shareholder of Qingyuan JDB Herbal), and Qingyuan JDB Herbal, because Wanglaoji Company had failed to fulfill its commitment to inject the trademark as in-kind capital into Qingyuan JDB Herbal as per the capital increase agreement. At the 2018 annual results conference held in March this year, COFCO Packaging told investors that it expected the arbitration with Qingyuan JDB Herbal and other companies to conclude between August and October. Senior management at COFCO Packaging emphasized that although the arbitration was still ongoing, the possibility of a future settlement could not be ruled out, but whether it is a "soft landing" or a "hard landing," they are confident in fully protecting their own rights and interests. However, at that time, due to the failure to reach an agreement on equity cooperation, COFCO Packaging stopped supplying packaging to JDB, leading to production cuts and affecting product supply. Currently, JDB has not responded to the China Times reporter's interview request. However, the China Times reporter found on JDB's official website that in January this year, JDB released a statement titled "JDB and COFCO Packaging Sign Agreement to Deepen Strategic Cooperation in 2019," stating that "in 2019, the total number of cans supplied by COFCO Packaging will reach 70% of JDB's annual production. This indicates that JDB and COFCO Packaging will further deepen their close cooperative relationship, and COFCO Packaging will continue to be JDB's most important packaging supplier." With 70% of production cooperation, it is clear that COFCO Packaging plays a pivotal role within JDB. According to Zhu Danpeng, an analyst in China's food industry, COFCO Packaging and JDB are currently in a game of strategy. When JDB was in a cash flow crisis and at a critical moment, COFCO Packaging stepped in. But now JDB has caught its breath and realized that the equity agreement signed with COFCO Packaging was a great loss. Therefore, it needs to reconsider how to define the equity distribution with COFCO Packaging. "However, JDB's capital is still tight, so it has little chance of winning the game against COFCO Packaging. If COFCO Packaging stops supplying cans, other partners may not dare to become JDB's packaging supplier," Zhu said. Source: China Times