Click to read the original article for details Is Yili likely to take over Huishan Dairy? On August 14, reports emerged that Yili Group (600887.SH) might invest 1.5 billion yuan to take over Huishan Dairy (06863.HK), becoming its new restructuring party and taking over the entire Huishan, including its massive debts. That afternoon, Yili responded, saying, "Yili has always considered the management of upstream and downstream partners as a key part of its corporate strategy. Yili Group and Youran Dairy have been invited to participate in the bidding for Huishan Dairy's restructuring. The project is still under negotiation and involves uncertainties. There is no further information to disclose at this time. Should there be substantive progress, the company will issue an announcement. We appreciate your attention and support." Clearly, Yili has indeed participated in the bidding for Huishan Dairy; regarding the reasons for bidding, Yili emphasized "management of upstream and downstream companies." According to a report by Jiemian News, a document titled "Investment Plan for the Restructuring of Huishan Dairy Group Enterprises by Inner Mongolia Yili Industrial Group Co., Ltd. and Inner Mongolia Youran Dairy Co., Ltd." shows that Yili plans to invest 1.5 billion yuan to acquire a 67% stake in Huishan Dairy, with debt-to-equity swap creditors holding 33%. It also indicates that the restructuring will be primarily carried out by Youran Dairy, a wholly-owned subsidiary of Yili. It is noted that Youran Dairy is a crucial part of Yili's upstream supply chain. Youran Dairy, formerly known as "Inner Mongolia Yili Animal Husbandry Development Co., Ltd." (renamed in August 2015), was established on August 1, 2007, as a wholly-owned subsidiary of Yili. It is a comprehensive animal husbandry company engaged in alfalfa cultivation, feed processing, sales, and dairy cattle breeding. Huishan Dairy was once a sizable local enterprise in Liaoning, and its former glory compared to its current situation is indeed lamentable. Previously, Bright Dairy, Mengniu, New Hope, and others had conducted research in Liaoning with intentions to take over, but they all abandoned the idea due to the massive debts. Now, Yili may take over with 1.5 billion yuan and has chosen its upstream company Youran Dairy as the restructuring party. Is it attracted by Huishan Dairy's upstream advantages? If not for the collapse two years ago, Huishan Dairy would still be the raw milk company with the most pastures nationwide. Now, when people talk about Huishan Dairy, the first thing that comes to mind might be its debt crisis. But before March 2017, it was considered a very high-quality enterprise in Northeast China. Although Huishan Dairy's assets are undergoing bankruptcy restructuring, according to its official website, Huishan Dairy has nearly 500,000 mu of alfalfa and auxiliary feed planting bases, a feed processing plant with an annual output of 500,000 tons of dairy cattle concentrate feed, over 200,000 purebred imported dairy cows, 82 large-scale self-operated pastures, and 6 modern dairy processing production bases. These self-operated pastures are geographically advantageous and suitable for raising high-quality dairy cows, which undoubtedly provides Yili with high-quality upstream raw milk resources, enabling further production of high-value-added products and enhancing market competitiveness. As a veteran dairy company in Shenyang, Huishan Dairy was listed in Hong Kong in 2013. Before March 24, 2017, its market value was approximately 40 billion Hong Kong dollars. Around 11 a.m. on March 24, 2017, Huishan Dairy's stock price suddenly plunged without warning, with an intraday maximum drop of 90.71%, the largest in its history. As a result, the actual controllers, Yang Kai and Ge Kun, saw their wealth evaporate by 20.9 billion yuan in a single day. Ge Kun, who was Yang Kai's early business partner and served as executive director and senior vice president in charge of finance at Huishan Dairy, has been out of contact since then. The stock price crash also exposed the debt crisis behind Huishan Dairy Group, involving financial claims of over 10 billion yuan, with more than 70 creditors, including 23 banks, over a dozen financial leasing companies, and some P2P and private equity institutions. Under these circumstances, Huishan Dairy had to seek debt restructuring. In December 2017, Huishan Dairy announced that the Shenyang Intermediate People's Court of Liaoning Province had ruled to accept the application by creditors for bankruptcy restructuring of its two major subsidiaries, officially initiating the bankruptcy restructuring process. However, the asset restructuring of Huishan Dairy has not been smooth. In April 2019, Huishan Dairy held its second creditors' meeting. Because ordinary creditors, mainly banks, and secured creditors voted against the plan by more than 50%, the "Draft Restructuring Plan for Liaoning Huishan Dairy Group Co., Ltd. and 83 Other Enterprises" was rejected at the second creditors' meeting. In May this year, the Hong Kong Stock Exchange announced that Huishan Dairy had been placed in the third stage of the delisting procedure. If the exchange does not receive a viable resumption proposal by November 15, 2019, the company's listing status will be cancelled. Source: The Paper