Tianxing Instrument Issues New Announcement on Berry Genomics' Backdoor Listing with Updated Restructuring Plan

The “Berry Genomics Backdoor Listing” Case Finally Sees New Developments.

On the evening of April 16, 2017, *ST Tianyi released its latest announcement stating that, due to the large aggregate number of ultimate beneficial owners—including legal persons, natural persons, and state-owned asset management institutions—traceable through certain limited partnerships involved in the restructuring transaction, the equity interest in Berry Genomics was transferred and these parties withdrew from the transaction. Accordingly, the company has adjusted its restructuring plan.

After *ST Tianyi disclosed its restructuring plan, experienced consecutive daily limit-ups, and received an inquiry letter from the Shenzhen Stock Exchange, this RMB 4.3 billion restructuring plan has finally seen new progress.

On April 10 and 11, *ST Tianyi hit the daily price limit down for two consecutive trading days, closing at RMB 55.83 per share in the most recent trading session. This marks the first time since *ST Tianyi announced its backdoor listing plan that it has experienced consecutive daily limit-downs. The abnormal stock price movement has also raised market concerns regarding Berry Genomics’ backdoor listing.

On the evening of April 11, *ST Tianyi clarified the recent abnormal stock price movements, stating that its recent operations were normal and that there had been no significant changes in its internal and external operating environments.

In this announcement, *ST Tianyi also disclosed the freezing of shares held by its controlling shareholder. At noon on the 12th, the company further announced its intention to adjust the restructuring plan, with an expected trading suspension period of five trading days.

On the morning of April 17, *ST Tianyi released its trading resumption announcement as scheduled: *ST Tianyi (000710) resumed trading starting from 09:30:00 on April 17, 2017.

The announcement revealed that Dingfeng Mingde Zhizhi and Dingfeng Mingde Zhengxin have signed the Share Transfer Agreement. Specifically, Dingfeng Mingde Zhizhi transferred its 1.0066 million shares in Berry Genomics to Junlian Maolin for approximately RMB 38.24 million. Of the shares held by Dingfeng Mingde Zhengxin, approximately 210,000 shares were transferred to Suzhou Qiming Chuangzhi for around RMB 7.5 million, and approximately 290,000 shares were transferred to Dingfeng Haichuan for around RMB 10.35 million.

According to the information provided by Berry Genomics and relevant parties, the transferors and transferees have completed the requisite procedures. Junlian Maolin, Suzhou Qiming Chuangzhi, and Dingfeng Haichuan have each paid the full share transfer consideration to Dingfeng Mingde Zhizhi and Dingfeng Mingde Zhengxin, respectively. Berry Genomics has also updated its register of shareholders to reflect the aforementioned equity transfers.

Following the adjustment, the shareholdings of Legend Capital Maolin, Suzhou Qiming Venture Partners, and Dingfeng Haichuan are as follows:

Apart from certain changes to the transaction counterparties, the revised plan does not differ significantly from the original one. The company will still acquire 100% of the equity interest in Berry Genomics, a well-known gene sequencing company, by issuing shares valued at RMB 4.3 billion.

Apart from the aforementioned content, no other adjustments have been made to the terms of this transaction. Following such adjustment, the shareholdings in Berry Genomics currently held by the counterparties to the share issuance for asset acquisition, as well as the number of new shares in Tianxing Instrument to be received by each counterparty, are set forth below:

According to the Securities Law, the number of shareholders shall not exceed 200 after look-through calculation for a company’s listing.

Where shareholdings are held through private equity funds, asset management plans, and other financial vehicles, if such financial vehicles are established and operated in compliance with relevant laws and regulations and are subject to the supervision of securities regulatory authorities, it is not required to restore the shareholding structure or convert to direct shareholding.

It is understood that Tianjin Junruiqi, Junlian Maolin, CDB Boyu Phase I, Suzhou Qiming Chuangzhi, Licheng Xuanwang, Licheng Yanke, and Licheng Yiji, as private equity funds, have completed the requisite filing procedures for private equity funds in accordance with the Securities Investment Fund Law and the Interim Measures for the Supervision and Administration of Private Equity Funds. Subject to the supervision of securities regulatory authorities, these entities are exempt from share restoration or conversion to direct shareholding.

Ultimately, the number of ultimate investors in the share issuance for asset acquisition transaction, after look-through calculation, was 145 (with duplicate entities excluded).

According to the announcement, following this restructuring, Tianjin Junruiqi holds the largest stake at 25.37%, Gao Yang holds 24.22%, and Hou Ying holds 12.86%.

In December 2012, Gao Yang and Hou Ying entered into the Company’s “Control Agreement,” stipulating that Gao Yang shall be the sole actual controller of Berry Genomics. Hou Ying shall express opinions on relevant proposals and matters at Berry Genomics’ shareholders’ meetings and board of directors’ meetings in accordance with Gao Yang’s views, and shall exercise proposal rights, nomination rights, and voting rights accordingly. Thus, Gao Yang is the sole actual controller of Berry Genomics, and Hou Ying is a party acting in concert with Gao Yang.

In other words, although Tianjin Junruiqi holds a 25.37% equity stake, which is higher than Gao Yang’s individual shareholding, Hou Ying acts as a party acting in concert with Gao Yang. Consequently, Gao Yang effectively controls 37.08% of the shares in aggregate. Therefore, Gao Yang possesses actual control over Berry Genomics at the equity level.

In August last year, *ST Tianyi disclosed a restructuring framework, proposing to sell all its existing business assets to its controlling shareholder, Tianxing Group, or a third party designated by it; meanwhile, it planned to issue shares to acquire 100% of the equity in Berry Genomics.

In this announcement, *ST Tianyi declared that it would sell its assets and liabilities to Tongyu Accessories. In other words, the “shell” is now ready, awaiting Berry Genomics to “borrow” it for a backdoor listing.