Huiyuan Juice has begun its delisting process. After being suspended for nearly two years, Huiyuan Juice did not see its trading resume; instead, it received a delisting notice. Since its suspension in March 2018 due to a violation involving a short-term loan, Huiyuan Juice has experienced a series of dark moments: its market value plummeted, and its founder's assets were frozen. Now, the former juice giant is about to face its biggest blow since listing. On the evening of February 14, Huiyuan Juice announced that it had received a letter from the Stock Exchange stating that, as trading in its securities had been suspended since April 3, 2018, and it had failed to fulfill the resumption conditions by January 31, 2020, the Listing Committee decided to cancel Huiyuan Juice's listing status. Notably, just two days before the announcement, Huiyuan Juice founder Zhu Xinli and his daughter announced their resignation from the board of directors.

-01- Huiyuan Juice to be Delisted Public information shows that Huiyuan Juice was listed on the Stock Exchange in February 2007, raising HK$2.4 billion, and was once the largest IPO on the exchange. However, due to irregular borrowing from related companies, Huiyuan Juice was suspended in April 2018, and the suspension lasted over 20 months. According to the new listing rules of the Hong Kong Stock Exchange, if a company's shares continue to be suspended for 18 months from the effective date, its listing status may be cancelled. However, as of August 1, 2018, if the suspension was less than 12 months, there was still a grace period of one and a half years, meaning that if Huiyuan Juice resumed trading before January 31, 2020, it could avoid delisting. But by the deadline, Huiyuan Juice had still not met the resumption conditions set by the exchange. On the evening of February 14, Huiyuan Juice announced that it had received a letter from the Stock Exchange stating that, as trading in its securities had been suspended since April 3, 2018, and it had failed to fulfill the resumption conditions by January 31, 2020, the Listing Committee decided to cancel its listing status. The letter from the Stock Exchange indicated that if Huiyuan Juice did not apply for a review of the delisting decision by the Listing Review Committee, the last day of listing would be February 28, and its listing status would be cancelled from 9:00 a.m. on March 2. This means that Huiyuan Juice may have only 10 working days left before delisting, and its 13-year journey as a listed company on the Hong Kong Stock Exchange is coming to an end. However, Huiyuan Juice stated that it is considering the delisting decision and will seek appropriate advice from its professional advisors, and may consider submitting a request for review of the delisting decision. But the board reminded shareholders and potential investors that the company may or may not proceed with a review, and even if it does, the outcome is uncertain. Meanwhile, Huiyuan Juice said its shares would remain suspended. Currently, Huiyuan Juice's total market value remains at HK$5.397 billion, the level at the time of suspension, down over 70% from its historical peak of HK$17.5 billion.

-02- Founder Exits Board Notably, just two days earlier, Zhu Xinli, who had controlled Huiyuan Juice for over 20 years, and his daughter Zhu Shengqin officially resigned from the board. Executive director Ju Xinyan was appointed as the new chairperson of the board. This means that Huiyuan Juice may officially bid farewell to the 'Zhu Xinli era.' On the other hand, starting from 2019, personnel changes at Huiyuan Juice became very frequent. In February 2019, six executives resigned within one month, and in October, company secretary Li Guohui resigned. At that time, only three executive directors remained: founder Zhu Xinli, Zhu Shengqin, and Ju Xinyan. Currently, only Ju Xinyan remains as executive director. In fact, before leaving the board, Zhu Xinli had already fallen into a series of troubles: he was listed as a 'person subject to enforcement,' received four consumption restriction orders, and had 4.1 billion yuan in assets frozen. According to the China Enforcement Information Public Network, a document issued by the Tianjin Third Intermediate People's Court on December 2 last year showed that in a dispute over a financial leasing contract with Minsheng Financial Leasing Co., Ltd., Zhu Xinli was listed as a dishonest person subject to enforcement and received a consumption restriction order because he failed to fulfill the payment obligations specified in the effective legal document within the designated period. According to the China Enforcement Information Public Network, Zhu Xinli had been listed as a person subject to enforcement four times since 2018 and was restricted from high consumption. In 2018, Zhu Xinli was still a billionaire with 3.5 billion yuan in assets on the Hurun Rich List. In 2019, the freezing of Zhu Xinli's 4.1 billion yuan assets became a hot topic on Weibo. On September 20, 2019, China Merchants Bank applied to the court for pre-litigation property preservation, requesting the seizure, detention, and freezing of equity, bank deposits, and other assets worth a total of 4.103 billion yuan held by China Deyuan Capital (Hong Kong) Co., Ltd. According to the ruling, the authorized agent of Deyuan Capital was its director, Huiyuan Group founder Zhu Xinli.

-03- Origin: Irregular Loans Exceeding 4.2 Billion Yuan Why did the former 'Juice King' fall so far? It all started with an irregular loan two years ago. In March 2018, Huiyuan Juice announced that between August 15, 2017, and March 29, 2018, it had provided short-term loans to Beijing Huiyuan Beverage to meet temporary working capital needs and repay debts. However, this loan of over 4 billion yuan was not approved by the board of directors and did not fulfill disclosure obligations, leading to a violation of the exchange's listing rules and a suspension that has not been lifted to this day. In June 2018, the Hong Kong Stock Exchange intervened in the irregular loan incident, requiring Huiyuan Juice to meet certain conditions for resumption of trading. If it failed to do so by January 31, 2020, the exchange would initiate delisting procedures. On January 31, 2020, Huiyuan Juice released an independent investigation report detailing how the loan was provided to related company Beijing Huiyuan Beverage without board approval, a signed agreement, or public disclosure. According to the report, from August to December 2017, without any management approval, the group's capital center transferred funds 66 times through 9 bank accounts of 4 group companies to 4 related companies. Under the agreement, Huiyuan Juice provided a total of approximately 4.283 billion yuan in short-term loans to Beijing Huiyuan Beverage at an annual interest rate of 10%. The loans were arranged by the then capital center director and the financial director of related company Beijing Huiyuan Beverage, without a written contract. The two executors classified the loans as internal bank transfers within the group, believing that they did not need to be reported to group management for approval, only requiring approval from the head of the group's capital center. It was this irregular loan that triggered a 'domino effect,' pushing Huiyuan Juice step by step to the brink of delisting. On April 3, 2018, Huiyuan Juice announced a suspension of trading in its shares and bonds, and the 2017 annual report, originally scheduled for release on March 29, was delayed. To date, Huiyuan Juice's 2017 annual report, 2018 annual report, 2018 interim report, and 2019 interim report have not been released. This also fails to meet the resumption conditions set by the exchange. Additionally, Huiyuan Juice was removed from the Hang Seng Composite SmallCap Index and other indices, as well as from the Stock Connect list. The suspended Huiyuan Juice is also burdened with debt. Public data shows that from 2014 to 2016, Huiyuan Juice's total liabilities reached 6.535 billion yuan, 7.662 billion yuan, and 9.995 billion yuan, respectively. At the beginning of 2018, unaudited accounts released by Huiyuan Juice showed that as of the end of 2017, its total liabilities reached 11.402 billion yuan.

-04- Missed Two 'Sell-out' Opportunities During its 13 years of listing, Huiyuan Juice missed two opportunities to sell itself, which laid the groundwork for the company's slowdown and eventual delisting. The first 'sell-out' was in the second year after listing. In September 2008, Coca-Cola announced plans to acquire all shares of Huiyuan Juice for a total of approximately HK$17.92 billion. To successfully 'sell out,' Zhu Xinli began to drastically cut sales staff. However, in March 2009, the Ministry of Commerce blocked the acquisition under the Anti-Monopoly Law. On March 18 of that year, Huiyuan Juice announced that the plan had failed due to lack of antitrust approval, which dealt a heavy blow to the company. As a result, Huiyuan Juice had to rebuild its sales channels, and its performance began to decline sharply. That year, net profit growth fell 15.07% year-on-year. By the second 'sell-out' attempt, Huiyuan Juice's situation had deteriorated significantly. On April 26, 2019, Huiyuan Juice announced the establishment of a joint venture with Tiandi No.1. According to the framework agreement, Tiandi No.1 and others would contribute 3.6 billion yuan in cash for a 60% stake, while Huiyuan Juice would contribute assets worth 2.4 billion yuan, including the Huiyuan trademark. Just three months later, the plan fell through. In an announcement, the company said it believed the conditions for the transaction were not yet mature and terminated the cooperation with Tiandi No.1 and others.

Source: China Fund News