On January 24, Huabao Co., Ltd. issued an announcement saying that the company recently received a notice of filing a case from the Leiyang City Supervisory Committee, and it decided to file a case for investigation into the violation of the company’s actual controller, Zhu Linyao.
Under the bad news, Huabao International, a Hong Kong-listed company controlled by Zhu Linyao, fell by 65% ??in two days, and its market value evaporated by 30 billion Hong Kong dollars.
According to public information, Zhu Linyao, 52 years old, is a rather mysterious female billionaire. In April 2021, Zhu Linyao ranked 831st on the Forbes Global Rich List with a fortune of 3.6 billion US dollars, and in November of the same year, she was selected as the 11th in the 2021 Hurun Women Entrepreneurs List with a wealth of 49 billion yuan.
It is worth mentioning that one of the important factors in the development of the Huabao Group under the leadership of Zhu Linyao is that it is able to develop such a large scale by deeply binding major customers in the tobacco industry.
As the largest flavor manufacturer in China, Huabao International, as the controller Zhu Linyao, was dubbed the "Queen of Flavor" by the industry. And because he is good at capital operation, Zhu Linyao was dubbed "the queen of pumping" by the investors.
Investigated or linked to anti-corruption in the tobacco system
According to the announcement of Huabao, as of now, Zhu Linyao has not held any positions in the company and has not participated in the company's operation and management. The above matters will not have a significant impact on the company's daily production and operation activities.
However, the Shenzhen Stock Exchange quickly issued a letter of concern, requiring Huabao to fully evaluate the impact of Zhu Linyao's investigation on the stability of the company's control, finance and production and operation management.
According to public information, Zhu Linyao was born in Sichuan in 1970. He is a Hong Kong citizen and majored in public secretarial. He established a flavor and fragrance trading company in Shanghai in 1996, namely Huabao Co., Ltd.
Huabao Co., Ltd. is a subsidiary of Huabao International. It is mainly engaged in the research and development, production, sales and service of tobacco flavors, food flavors, daily flavors and food ingredients. From 2014 to 2020, its annual sales ranked first in the industry (the above rankings From China Fragrance, Flavor and Cosmetics Industry Association).
A recent research report from China Merchants Securities pointed out that Huabao International is a leading company in traditional tobacco flavors in China.
According to Huabao's prospectus, the tobacco flavor business revenue accounts for more than 80% of the company's total revenue. From 2015 to 2017, China Tobacco Yunnan and China Tobacco Hunan were the company's first and second largest customers, respectively, accounting for about 40% of the company's sales.
Due to the close business relationship between its subsidiaries and tobacco companies, the market speculates that Zhu Linyao's investigation this time is related to the anti-corruption of the tobacco system.
On October 30, 2020, the website of the Central Commission for Discipline Inspection and the State Supervision Commission disclosed that Lu Ping, Secretary of the Party Group and General Manager of Hunan China Tobacco, was suspected of serious violations of discipline and law, and is currently undergoing disciplinary review and supervision investigation.
On August 23, 2021, according to the news of "Sanxiang Discipline", Liu Jianfu, a member of the party group and deputy general manager of Hunan China Tobacco Industry Co., Ltd., was suspected of serious violations of discipline and law, and voluntarily surrendered. Disciplinary review by the Ministry of Discipline Inspection and Supervision Team and supervision and investigation by Hunan Provincial Supervisory Commission.
It is reported that the connection between Liu Jianfu and Huabao International can be traced back to 2011. On March 29 of that year, the unveiling ceremony of "China Tobacco Hunan/Huabao Group Joint Key Laboratory" was held in Changsha, Hunan. The key laboratory was unveiled.
At the same time, a number of media reprinted a piece of news. Recently, the "Notice on Reporting Relevant Procurement Situations" issued by the State Tobacco Monopoly Administration's Standard Management Office circulated on the Internet shows that "all directly affiliated units in the industry and the development of China's tobacco industry are required to "Center" to verify and provide business transactions with companies such as Huabao International in the past three years (2019-2021).
On January 24, 2022, the day that Zhu Linyao was placed on file, the website of the Central Commission for Discipline Inspection informed that Zhou Tao, deputy secretary of the party group and general manager of Yunnan China Tobacco Industry Co., Ltd., was suspected of serious violations of discipline and law, voluntarily surrendered and was under investigation.
Lian Dayou, director of Beijing Jingben Law Firm, said that under normal circumstances, the supervisory committee will file a case against the owner of a private enterprise only when the owner of a private enterprise is implicated in an illegal act with a public official.
"Pumping Queen" is good at capital operation
In the capital market, due to Zhu Linyao's superb financial skills, she has won the title of "Pumping Queen" in the Hong Kong stock market.
In March 2004, Littelco issued ordinary shares and preferred shares to companies controlled by Zhu Linyao at HK$0.1 per share, and changed its name to Huabao International. After the completion of the issuance, Zhu Linyao therefore owns 90.99% of the issued shares of Huabao International, and the backdoor cost is about HK$70 million.
Litek's main business is computer-related products. Due to fierce competition in the industry, low profitability, and poor equity investment returns, it has become a penny stock after years of losses.
Due to the expectation of Zhu Linyao's asset injection, the stock price of Huabao International closed at HK$1.3 on the first day of resumption of trading after the completion of the backdoor, and stabilized at more than HK$1 for a long time. As a result, Zhu Linyao obtained a book surplus of about 10 times.
About two years after the backdoor listing, in April 2006, Zhu Linyao transferred the overseas holding company Chemactive with its registered address in the British Virgin Islands to Huabao International at a price of HK$3.996 billion; as a consideration, the listed company paid HK$1.8 Issued convertible preferred shares to Zhu Linyao at the price per share.
Chemactive holds Zhu Linyao's core assets in the domestic flavor and fragrance industry, including high-quality enterprises such as Huabao Shanghai, Huabao Peacock, Qingdao Huabao, Yunnan Tianhong and Guangzhou Huafang.
Calculated on the basis of Chemactive’s net profit after tax of HK$301 million that year, the static price-earnings ratio of this acquisition is 13.28 times, which is far lower than the static price-earnings ratio of 20 to 25 times of comparable companies in the same industry.
Before the asset injection, Zhu Linyao already owned 90.99% of the issued shares of Huabao International, and the shareholding ratio further increased to 97.57% after the asset injection was completed. Therefore, the low-priced acquisition seems to be a confrontation between the right and left of the major shareholders, but in fact, the generous market of the major shareholders is in the eyes of the market, and the good market image of Huabao International is thus established, paving the way for Zhu Linyao's follow-up capital operation.
In August of the same year, in order to solve the situation of insufficient liquidity and light trading caused by too little public shareholding, Huabao International announced that Zhu Linyao would convert the convertible preferred shares and warrants he held into ordinary shares, and Of these, 690 million shares were placed to public shareholders. After the completion of the placement, Zhu Linyao's shareholding dropped to 74.89%, and the shareholding of public shareholders rose to 25.11%. Not only the company's listing qualification was preserved, but Zhu Linyao also successfully cashed out HK$1.518 billion.
In January 2007, as the stock price of Huabao International continued to rise, Zhu Linyao cashed out about HK$1.265 billion in the same way. In July of the same year, Zhu Linyao injected his 100% holding Kaixin Group into Huabao International, and obtained a transfer difference of 21 million Hong Kong dollars.
In March 2008, Zhu Linyao transferred shares to the counterparty again by virtue of an acquisition business of Huabao International, and successfully cashed out 451 million Hong Kong dollars.
By the end of 2010, the total market value of Huabao International had soared to HK$39.622 billion, an increase of more than 10 times compared to 2006. In the process, according to the data of the Hong Kong Stock Exchange, Zhu Linyao cashed out more than 8 billion Hong Kong dollars in total.
At the same time, the tobacco industry had a ceiling around 2010. In the following years, Huabao International's stock price fell sharply, during which Zhu Linyao continued to increase his holdings.
In November 2016, Zhu Linyao announced the privatization of Huabao International at a price of 3.3 Hong Kong dollars. Since the premium rate was only 10%, the shares finally acquired by Zhu Linyao were less than the minimum requirement of 90%, and the privatization ended in failure.
But with this method, by March 2017, Zhu Linyao increased his shareholding ratio to 73.60%. In other words, a series of operations in Hong Kong stocks over the past 10 years have cashed out tens of billions of cash, while Zhu Linyao's equity has basically not decreased. In this regard, many people regard Zhu Linyao as a capital predator, saying that through superb financial techniques, he has played the capital game to the extreme.
As of the close on January 25, the total market value of Huabao International was HK$16.634 billion, and Zhu Linyao's 71% stake was worth HK$11.8 billion.
In addition to selling high and buying low in Hong Kong stocks, in the A-share market, Zhu Linyao also frequently borrowed dividends to cash out.
In March 2018, Huabao International spun off Huabao shares and listed on the Growth Enterprise Market. It has only been listed for one year. On March 12, 2019, Huabao shares disclosed the dividend distribution plan. The company distributed a cash dividend of 40 yuan (tax included) to all shareholders for every 10 shares, with a total cash distribution of about 2.464 billion yuan. The company's net profit attributable to its parent in 2018 was only 1.176 billion yuan.
On March 28, 2020, Huabao disclosed the dividend distribution plan for 2019, and distributed a cash dividend of 19.8 yuan per 10 shares to all shareholders, with a total dividend of 1.22 billion yuan and a net profit of 1.236 billion yuan attributable to the parent for the year.
On March 19, 2021, Huabao disclosed its dividend distribution plan for 2020. It plans to distribute a cash dividend of 16 yuan (tax included) for every 10 shares to all shareholders, with a cumulative dividend of 985 million yuan, accounting for 83.5% of the net profit.
According to this statistics, since its listing, from 2018 to 2020, Huabao has distributed a cumulative dividend of 4.669 billion yuan (tax included) within three years.
Flush iFinD data shows that since March 2018, Huafeng International Investment Holdings (China) Co., Ltd. held 81.10% of Huabao shares unchanged.
This also means that Huafeng International, under the control of Zhu Linyao, has received a total of about 3.787 billion yuan in dividends from Huabao.
"The Queen of Flavor" Mysterious Birth History
Before being investigated, Zhu Linyao was surrounded by aura, not only holding a number of listed companies, but also on the rich list many times.
In 2008, "Forbes" published a list of female billionaires with a net worth of more than one billion US dollars, and Zhu Linyao was among them. This was the first time she entered people's field of vision.
Even after Zhu Linyao's entrepreneurial story and wealth slowly surfaced, his background is still mysterious.
According to media reports, Zhu Linyao was born in Sichuan in 1970 and was admitted to a university in Beijing around 1986. After graduation, because he was optimistic about the spice market, in 1990, Zhu Linyao established his first flavor and fragrance trading company in Beijing to carry out related businesses such as wholesale and sales of spices.
Zhu Linyao had just turned 20 when he started his own flavor and fragrance trading company, and little was known about the source of his first pot of gold.
In the 1990s, with the rapid economic development, people's requirements for the quality of food and daily necessities became higher and higher, which promoted the strong growth of the global flavor and fragrance market.
For tobacco products, the essence can blend with the cigarette to produce unpleasant bitter and spicy taste when burning, and it is an essential raw material to ensure the taste. At that time, domestic tobacco flavors were basically imported, and the market share was mostly monopolized by international giants such as Givaudan in Switzerland and IFF in the United States.
Under such an industry background, Zhu Linyao entered the fragrance industry to start a business. At the same time, in Dianbai County, Maoming, Guangdong, which is more than 2,000 kilometers away from Beijing, the spice chemical industry is booming.
After graduating from the University of California with a Ph.D., electric white man Lin Guowen invested 3.8 million yuan in Maoming to establish Guangdong Huabao Flavors and Fragrances Co., Ltd., engaged in the production and sales of flavors and fragrances.
The identity of Lin Guowen is also mysterious. It is reported that Lin Guowen, who was born in 1963, moved to Hong Kong, China in his early years in order to inherit the property left by his relatives.
Once Zhu Linyao went to Shanghai to do business and met Lin Guowen, the boss of Dianbai. The two quickly developed from partners to lovers and entered the hall of marriage.
After the marriage, Zhu Lin, Yaolin, Guowen and his wife merged the enterprises under their respective names to form a new company, Huabao Group, and start a large-scale expansion. It is worth noting that in the later development of Huabao, Lin Guowen gradually "abdicated", and Zhu Linyao went to the front.
Under the control of Zhu Linyao, Huabao Group mainly focuses on the tobacco flavor market. However, this industry has its particularities. For cigarette companies with deep pockets, on the one hand, the high profits of tobacco make tobacco companies less motivated to control costs. The main orientation of large cigarette companies.
According to media reports, in order to cater to this trend of customers, Huabao Group changed its marketing model, gave up purely market-oriented competition, and then adopted the model of equity cooperation with cigarette companies and joint ventures to establish flavor and fragrance production companies to deeply bind key customers. .
There are many similar cooperation cases, including Yunnan Tianhong, a joint venture established by Huabao and Hongta Group in 2001, which became a supplier of brands such as Yuxi; in 2003, Qingdao Huabao, a joint venture established by Huabao and Yizhong Group, became a brand such as Hardman. In 2005, Huabao acquired a 51% stake in Guangzhou Huafang, and the remaining 49% was held by China National Tobacco Corporation Guangdong Branch.
In this way, while stabilizing the source of customers and expanding the market share, in 2004, Huabao Group acquired a company under Shanghai Jahwa and became an important manufacturer in the field of edible flavors.
After her fortune, Zhu Linyao kept a low profile. Her company's employees recalled to the media that, unlike other bosses, she seldom told her family history in front of employees, nor did she like to talk about her struggles, which made her fortune. The background becomes blurred.
