Chapter 19 CEO Shi Yuzhu: "They say I don't understand business operations at all"

, whether Shi Yuzhu who has stood up again has paid off his debts, how did Shi Yuzhu and Duan Yongji know each other, what is their relationship... For these questions, reporter Zheng Wenwen's interview with Shi Yuzhu is nothing more than an in-depth interpretation. ◎Reporter: When was your first relationship with Duan Yongji?for what? ◎Shi Yuzhu: It can be traced back to the history of Taishan Research Institute.It's a non-profit organization that's active every year, once or twice a year or so.This organization does not call for everyone to cooperate, does not talk about politics, does not talk about the macro, but only discusses corporate development and investment management experience.The meeting is closed, everyone is not allowed to bring entourage, and external contact is not encouraged.Every year, the members take turns to be the banker.In May of this year, with Feng Lun as the farmer, he went to New Zealand to hold an event for three days.Focus on diversification. Everyone agrees that diversification will not work and should be specialized.

◎Reporter: Are all the members of the famous Taishan Research Institute private entrepreneurs? ◎Shi Yuzhu: The members are all related to the company. There are fifteen or sixteen members.The staff is different from when it was first established.The current members are: Duan Yongji, Liu Chuanzhi, Duan Yongping, Feng Lun, Lu Zhiqiang, Lin Rongqiang, Zheng Yaowen, Yuan Si and Wu Li.The advisors are Wu Jinglian and Hu Deping.Duan Yongji is the chairman, Liu Chuanzhi is the president, and Hua Yifang is the secretary-general. In the second session in 1992, I was the banker and paid for the meeting in Zhuhai.I participated in the most difficult years of 1995, 1996 and 1997. The theme of the event held in Mount Tai in 1996 was to talk about the giant's business operations.At that time, the giant started to go downhill, but the outside world didn't know about it. I took the initiative to ask everyone to discuss this case.

◎Reporter: Close the door, do people scold you? ◎Shi Yuzhu: Yes.Everyone said very sharply, saying that I violated many rules.It is equivalent to a friend criticizing me.At that time, I was really hot-headed.But the meeting did not discuss how to give a helping hand, because this organization does not encourage it.Moreover, I don't want to harm anyone myself, the possibility of saving the giant is too small. ◎Reporter: Later, did Duan Yongji lend you some funds? ◎Shi Yuzhu: Mr. Duan has never given financial support.I never mentioned it either.Maybe borrowing money can't save the giant.They gave a lot of spiritual encouragement when they were difficult.

◎Reporter: What was the most difficult criticism you could accept at that time, especially the people from the Taishan Research Institute? ◎Shi Yuzhu: Say I don't understand business operations at all. ◎Reporter: If there were funds, how much would be needed to save the giant? ◎Shi Yuzhu: (Thinking about it) The possibility of resuscitation is small. ◎Reporter: Do you still often talk about that period of history now? ◎Shi Yuzhu: In 2000, my situation was getting better. When the outside world didn’t know, Mr. Duan reminded again: You are going to be qualified to make mistakes again.

◎Reporter: Are you afraid of the tight capital chain now?There is a saying that the rivers and lakes are dangerous. ◎Shi Yuzhu: (laughs) The rivers and lakes are of course dangerous.But it's no longer dangerous to me.I haven't worked with anyone these years, I've done it myself.You learn the most when you are most difficult.Not to diversify is a lifelong useful lesson.The sales volume of Brain Gold has reached 560 million yuan, but there are more than 300 million bad debts.At that time, it was common for giants to deceive the superior and the inferior, and everyone released satellites.Now the company management system I have formulated is very simple: do what you say, don’t talk if you can’t say it; just give credit, don’t work hard.The company has a five-level internal credit rating. For example, people with poor credit have to pay for their own business trips first.

◎Reporter: You purchased the equity of some financial institutions through Shanghai Jiante and other companies. Is this related to your capital arrangement? ◎Shi Yuzhu: I invest in bank equity as a strategic capital reserve, because it can be cashed out at any time.I spent 300 million yuan to buy 1.4 billion shares of Huaxia Bank from Shougang and Stone, and 198 million shares of Minsheng Bank from Feng Lun.The return of the two banks is not less than 15%. Last year, Minsheng Bank’s net asset income was 15%. In addition to a debt-to-equity swap last year, the net asset per share increased by more than 1 yuan at once. It will be listed in Hong Kong in September this year. It can also increase the net asset value per share.When investing in Hua Xia Bank, the net assets per share were 1.1 yuan, and the net assets per share increased to 2.7 yuan after listing.Investment banking is not for the financial industry.When you have too much money at hand, you will think about investing. The return of investing in the bank is not low, and if you lack money, you can cash it out.

◎Reporter: If you make an assessment of the living environment of private enterprises, what opinion do you have? ◎Shi Yuzhu: Is it appropriate to use the word "sinister"?There are so many rules and regulations in the law, and you will bump into them at every turn.But I have two principles.One is not to have problems with loans.When looking for a bank loan, the leader does not come forward, and the financial personnel handle the business on their own.In fact, I don't need a loan very much. I need a little before the peak season every year, and I will pay it back in 3 months.However, it is still not easy for private enterprises to obtain loans.Second, tax evasion and tax evasion are not allowed. Legal tax avoidance is fine, but you must consult the best accounting firm and the tax bureau.Doing so will ensure that nothing major happens.

◎Reporter: The "Giant Disturbance" has passed, and the debts have been paid off? ◎Shi Yuzhu: In 2001, he paid off his debts.From my point of view, all the money has been paid back.There are still a few natural persons (creditors) who can't be found, some have gone abroad, and some have passed away. These few people probably involved hundreds of thousands of funds.In addition, there are 4 Hong Kong people who have not returned the money. These Hong Kong people think that the Zhuhai-Hong Kong-Macao Bridge will be built, and the property prices in Zhuhai will rise sharply. They want the property, not cash.The money for this part of the debt has been transferred to the account designated by the government's debt investigation team for supervision.

◎Reporter: Do you feel light? ◎Shi Yuzhu: For me, this problem has passed. ◎Reporter: If you don't make health care products like melatonin, can you turn over so quickly? ◎Shi Yuzhu: Yes, if I don’t do melatonin, I didn’t turn around so quickly. In 1998, I borrowed 500,000 yuan from a friend and started to operate Melatonin.First build a county, then build a city after you have money, and then build a province. It took two years to open up the national market. At the beginning of 1999, 1/3 of the national market was opened, and the national market was almost opened at the end of the year.The real full year is from 2000 onwards.If you want to open the national market now, it only takes 3 months.The health care product industry has just started, and has not yet reached the point of excessive competition and product homogeneity. This is different from color TVs that are prone to price wars. The health product industry relies on technology, has differentiation, and there is no price war.This industry can be subdivided into hundreds of industries, such as blood supplementation and calcium supplementation, which are different industries.In this industry, the total cost accounts for a small proportion, the industry average is 1/3, and the sales cost is 20%.

◎Reporter: Duan Yongji said at the meeting (Shi Yuzhu's press conference as CEO of Stone Holdings held in Hong Kong on August 12th) that you once worked in the IT industry just like him.After the giant accident, why didn't you choose the IT industry? ◎Shi Yuzhu: At that time, I was weighing between IT and melatonin.If you do IT, it may take 10 years to turn around; while doing Melatonin, it was planned to take 5 years to turn around, but it actually took 3 years.However, if the threshold for making health care products is high now, it will definitely not work without 100 million.When I was a "golden partner", I prepared 300 million yuan, but actually spent more than 200 million yuan.When being a "golden partner", only one person is used in a county.

◎Reporter: Don’t engage in crowd tactics like King of Hearts? ◎Shi Yuzhu: Heart K also changed his strategy.It is said that they have achieved more than 400 million (sales) now. ◎Reporter: Does Giant have sufficient cash flow? ◎Shi Yuzhu: The giant itself is not short of money. In the name of Shanghai Jiante, we paid off the debt with cash, bought the shares of Huaxia Bank and Minsheng Bank, and paid 100 million cash to Stone Juguang in one lump sum (April 2002 Tong Group will transfer 42.3% of the shares held by Stone Investment Co., Ltd. to Stone Juguang—56.14% held by Shenyang Heguang Group, 14.04% held by Guangcai Enterprise, and 14.04% held by Giant Company, representing the management of Stone Zhang Disheng and Peng Jianwei hold 7.89% and 7.01% respectively).In the past few years, I have been doing melatonin, and the after-tax profit has exceeded 1 billion.This year's profit mainly depends on next year's Spring Festival (for this reason, Stone Holdings adjusted its fiscal year from March of the previous year to March 31 of the next year). "Golden Partner" sold very well during the Spring Festival this year, earning at least 30 million yuan a week, and a maximum of 47 million yuan a day, all in cash.The original plan for the Spring Festival was 500 million yuan, but it turned out to be more than 800 million yuan.The business during the Spring Festival generally accounts for about half of the whole year. ◎Reporter: Please introduce the negotiation process of cooperation with Stone.Who is looking for whom? ◎Shi Yuzhu: We started discussing this matter formally in July last year.After SARS last year, after careful research, Stone formulated a strategy to enter the health industry.Duan Yongji approached me to inquire about the acquisition of a health care product company. I recommended Hengshoutang to him, but the negotiation failed at that time.Later, the two of us cooperated on our own. After we decided to cooperate, the sale of Hengshoutang was also negotiated! (On August 12, Stone Holdings announced that its wholly-owned branch, Stone Giant Life Technology Development Co., Ltd., acquired the entire share capital of Shanghai Hengshoutang Pharmaceutical Co., Ltd. for 60 million yuan in cash). ◎Reporter: Have you planned to go public by yourself instead of going public in the current way? ◎Shi Yuzhu: Giant originally wanted to go public in Hong Kong and step into the international capital market platform.An intermediary agency has been found, but in the end it didn't work.I want to take the route of red-chip stocks, not the route of H-shares, because H-shares may have problems such as legal person shares that cannot be circulated, and there are many restrictions.To go the way of red chips, you need the China Securities Regulatory Commission to issue a no-objection letter, which is theoretically possible, but in fact there have not been many companies, so it is impossible.If listed as envisaged, it should be able to raise about 1 billion yuan. ◎Reporter: Why are you so optimistic about Hengshou Hall?Is Song Wei, the major shareholder of Hengshoutang, a collaborator with you? ◎Shi Yuzhu: I have nothing to do with Hengshoutang.Song Wei, the owner of Hengshoutang, was born in securities, but something happened and he wanted to sell the company.This brand and sales network are good, concentrated in several central cities in Shanghai, Jiangsu and Zhejiang. ◎Reporter: Is this transaction with Stone a backdoor listing of the giant? ◎Shi Yuzhu: It cannot simply be said that it is a backdoor listing.If it is a backdoor, the shell must be empty, but Stone Holdings actually has content. For example, the 9.6 million shares of Sina stock rose to $50 per share at the highest point last year, worth several billion yuan. ◎Reporter: From the book point of view, what are Duan Yongji's interests? ◎Shi Yuzhu: Stone Holdings bought Sina shares last year to cash in Sina, earning 0.6 yuan per share.Stone can obtain relatively stable cash flow and income through this cooperation.Stone must find a sustainable profitable growth point. ◎Reporter: Did you go public or find Stone as a financing platform to facilitate future mergers and acquisitions? ◎Shi Yuzhu: The key is mergers and acquisitions.Now there are large state-owned enterprises that have withdrawn, and if they want to buy them, they can easily spend 1 billion yuan.We are now focusing on over-the-counter drugs, and we have talked about one so far, but they have not been negotiated.It may also be extended to related industries, and it may also be health wine.For example, Lugui Wine is doing very well, and Dong Wine is also a health wine, and it will cost more than 200 million yuan to buy it. Constraints more symbolic than real value? ◎Reporter: The seller of this transaction is actually yourself. You can get 600 million Hong Kong dollars in cash and value, and 571 million Hong Kong dollars in convertible bonds.Is this statement accurate? ◎Shi Yuzhu: It can be said according to the financial arrangement. ◎Reporter: From the surface, the two sides of this transaction cannot see the shadow of Stone Holdings and Giant.How long did it take to work those stakes? ◎Shi Yuzhu: The buyer is Stone Giant (that is, "Stone Giant Life Technology Development Co., Ltd.", a wholly-owned subsidiary of Stone Holdings registered in the Cayman Islands at the end of December 2003); the seller is Ready Finance (the company was established in Incorporated in the British Virgin Islands on December 3, 2002, wholly owned by Shiben), it is the wholly owned shareholder of Central New, and Central New held 75% equity interest in Golden Partner Biotechnology at that time. Central New was incorporated in the British Virgin Islands in October 2003. It was registered for the purpose of acquiring the equity of a golden partner biotechnology company. I am the beneficiary.All of these are designed by world-renowned accountants, lawyers, and investment banks.My principle is that first-class lawyers and accountants must be involved. ◎Reporter: Stone Giant, Ready Finance and Central New are all registered overseas "shell" companies for the purpose of acquisition? ◎Shi Yuzhu: Later, the business was included, and the purchase contract has detailed instructions. ◎Reporter: How is the purchase price determined?It is said that some constraints were proposed by Duan Yongji, are they symbolic constraints? ◎Shi Yuzhu: Stone Holdings acquired the distribution network of "Melatonin" and "Golden Partner" through 75% equity of Shanghai Golden Partner Biological Co., Ltd. at the cost of HK$600 million in cash plus HK$570 million in convertible bonds, 8 On April 12, it purchased 100% of the equity of Shanghai Hengshoutang Pharmaceutical Co., Ltd. for 60 million yuan.The purchase price is based on the 2004 profit guarantee of the golden partner company reaching 170 million Hong Kong dollars, and then multiplied by the price-earnings ratio of 9.74 times.He (referring to Duan Yongji) proposed to divide the bonds into three parts A, B and C, and the time for these three parts to be converted into shares of Stone Holdings is 12 months, 15 months and 27 months respectively.From April 1st of this year to March 31st of next year, which is the adjusted new fiscal year, the profit will reach 170 million yuan (last year's profit guarantee was 90 million yuan, and the actual completion of 120 million yuan, of which Melatonin profit was 150 million yuan, the golden partner is In the first year, the loss was 30 million). ◎Reporter: What about other constraints?It sounds like Stone spent more than 1.1 billion yuan to buy the sales network of melatonin and gold partners.What if Shi Yuzhu left with his team? ◎Shi Yuzhu: I don't know the specific details of the cooperation with Stone.In my understanding, it is the sales network of melatonin and gold partners, 75% is placed in Stone, and 25% is placed in Giant.For example, the trademark rights of Melatonin are placed in Stone, and the production approval documents are placed in the Wuxi manufacturing plant, which belongs to Jiante Bio; patented technologies, such as packaging and production processes, are also placed in Stone.In addition, the constraint for me is that I cannot make competitive products with melatonin and gold within 5 years. (Note: After the reporter interviewed Duan Yongji, he learned that Duan’s response was: If Shi Yuzhu ran away with his team, then Sitong would bear the moral hazard. If we even doubt this, we will also doubt the place where we stand .) ◎Reporter: Your annual salary of "1 yuan" in Stone, is it symbolic, or is it a real price? ◎Shi Yuzhu: I don't care about salary, I care about doing business well.My stake will go up if there are further acquisitions.So far, I have not discussed the salary issue with the board.When I mentioned this issue once, I said that I would give a symbolic one yuan, and we would talk about it after the results came out. ◎Reporter: It is mentioned in the acquisition contract that your shareholding ratio will exceed the previous major shareholders of Stone Holdings—Beijing Stone Investment Co., Ltd. and Stone Group (the two shares total 22.93%).Then you will become the largest single shareholder of Stone Holdings.Everyone can't help but ask - who will be the real controller of Stone? ◎Shi Yuzhu: First of all, I did not come here to control Sitong.I am the CEO of Stone Holdings and exercise the corresponding power. It is not a matter of who eats who. ◎Reporter: Please introduce your original team.For those who have followed you personally for ten years, how to reflect their interests? ◎Shi Yuzhu: When Giant was most difficult, there were hundreds of people who stayed behind. Now they are the backbone above the middle level. The average working age is 8 years.Now in his early 30s, the team is very stable.When cooperating with Stone, I proposed to give these people options, but I didn't finish it later, and I had to wait for the company's reorganization to complete.Perhaps in the future, the incentive mechanism for them will be resolved in the form of warrants.The core team includes the management department, which is now merged into Stone Holdings and is in charge of Liu Wei; the planning department is in charge of Cheng Chen; there is also an investment department, namely Giant Investment (Shi Yuzhu himself holds 95% of the shares), the manager keeps it secret, because Worried about being poached by the company. ◎Reporter: How to establish the composition of the new directors and the senior management of the "New Four Links"? ◎Shi Yuzhu: The new board of directors after the merger will have 6 executive directors, and the ratio of old and new directors will be 2:4.Executive directors Duan Yongji, Chen Xiaotao, Shen Guojun and Zhang Disheng are all veterans of Sitong; Liu Wei (Shi Yuzhu's assistant and general manager of Shanghai Golden Partner Biotechnology Co., Ltd.) and I are new executive directors. [Note: When the reporter later interviewed Duan Yongji, he learned that the main division of labor at the top of the "New Four Links" has been basically established. Duan Yongji is in charge of capital operation and public relations; Shi Yuzhu is in charge of the life and health industry; Responsible for the health care industry; Zhang Disheng is responsible for finance; Shen Guojun is not in charge of specific affairs for the time being (Shen is the former chairman of Stone Holdings Datou East Stone Investment Co., Ltd.). ◎Reporter: With such a proportion of board members, how to check and balance if conflicts arise? ◎Shi Yuzhu: The ideal ratio is 3 votes to 3 votes, and I hope it will be realized one day.We are not a superior-subordinate relationship, but a cooperative relationship.When making a decision, I propose a plan and he (referring to Duan Yongji) approves it. (Note: Duan Yongji's response to this question is: I said that when the door is closed, you can slap the table and the bench, and there is only one voice to the outside world. I appreciate what Shi Yuzhu said to the employees a few months ago-from now on , you yourself have to forget whether you are a stone or a giant.) ◎Reporter: You keep issuing clarification announcements (the latest announcement is on August 16), saying that the core business of "New Stone" will not change from electronic distribution to health care products, or end its electronic product business. Why are there so many misunderstanding? ◎Shi Yuzhu: In Stone Holdings, life science and technology will become the main business of course, and the new investment in IT business will be extremely prudent.Companies that are not making money or making little profit will be cut off; only companies with an annual profit of more than 10 million will be kept.Hope to do it right away.