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Shares of a major Hunan-based fuel company surged to the daily limit for the third consecutive day following an announcement that it intends to invest up to 540 million CNY (approximately USD 75.9 million) to acquire a significant stake in a semiconductor intellectual property firm. The company’s stock closed at 33.91 CNY (USD 4.76), marking a 10% increase.
The company revealed plans on November 16 to allocate CNY 540 million for a 34% ownership position in the Changsha-headquartered semiconductor IP firm. Through a voting rights agreement, it will secure control of 51% of the company’s voting power. After the capital injection, the total valuation of the target company is estimated not to exceed CNY 1.5 billion (around USD 223 million).
Currently operating 35 gas stations, the company has experienced declining profits in its wholesale and retail refined oil segments, with net profit dropping significantly since reaching a peak in 2020. Last year, net income diminished to less than 20% of its 2020 figure. In the first nine months of this year, net profit nearly halved year-over-year to just CNY 21.8 million (about USD 3 million). As of September 30, it held CNY 312 million (roughly USD 43.8 million) in cash and cash equivalents. The company is also venturing into new energy, specifically charging stations.
The targeted semiconductor firm was founded in August 2021 and specializes in developing high-speed interface IP and chiplet solutions within the niche semiconductor market. Despite the rapid growth in the chip industry, it has accumulated net losses of approximately CNY 84 million (around USD 11.8 million) over the past two and a half years.
It remains to be seen whether this acquisition will foster meaningful synergies.
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