On December 6, 2017, China Securities Regulatory Commission (the “CSRC”) approved the transaction in which JPMF Guangdong Co., Ltd. (the “JPMF”, SZ002600) purchases assets by issuing shares (the “Transaction”). In this Transaction, JPMF will purchase 100% equity interest of Ling Yi Technology (Shenzhen) Co., Ltd. (the “LY Tech”) and issue its shares to the current shareholders of LY Tech, with a total consideration of RMB20.73 billion. As a result of this Transaction, JPMF will own 100% equity interest of LY Tech, while the de facto controller of JPMF will change to Zeng Fangqin. The transaction is regarded as a backdoor listing.

LY Tech’s backdoor listing via JPMF is the first one of its kind which revealed details about its transaction and obtained approval from CSRC within this year. Moreover, it is also the first precedent of backdoor listing with industrial integration, which makes it another innovative classic example.LY Tech’s backdoor listing via JPMF is the first one of its kind which revealed details about its transaction and obtained approval from CSRC within this year. Moreover, it is also the first precedent of backdoor listing with industrial integration, which makes it another innovative classic example.

In the Transaction, JPMF’s original assets will not be sold given that its business synergy with LY Tech’s. JPMF possess cutting-edge technology of developing high-performance materials such as ferrite permanent magnet and soft magnetic material in China, and it has entered into consumer electronics industry by acquisitions of Shenzhen DJN Optronics Technology Co., Ltd. (the “DJN”) and Shenzhen Dongfang Liangcai Precision Technology Co., Ltd. (the “DFLC”). LY Tech supplies high-precision small components in “one-stop” for global leading consumer electronics manufacturer. It is also a comprehensive supplier of metal parts, internal and external functional devices, adhesive and EMI parts. By consolidating the businesses of JPMF, LY Tech, DFLC and DJN, including sources like suppliers and clients in the whole industry chain, the Transaction helps LY Tech achieve overall planning, adopt joint layout in consumer electronics industry and quickly adapt itself to new demands on technologies in the related industry as well as trends for modularized component, which are significant for its future development.

This Transaction is subject to the new rules regulating material assets restructuring of listed companies. Under such new rules, CSRC raised the bars for backdoor listing by applying the same standards as IPO. Moreover, LY Tech, as a large scale company with complex structure in a highly competitive industry, had a quite tight backdoor listing schedule. All of these situations set forth above pose high level requirements and challenges for lawyers.

We, acting as the legal counsel for JPMF,  offered high-quality legal service in this Transaction, including deal structure, due diligence investigation, special legal compliance, documentation, etc.. This deal was led by KWM partners Pan Yujia and Wang Jianxue.