Chapter 28 The Troika: The Exaggerated Myth of Integration

In 1996, Tang Wanxin moved the headquarters of Delong to Beijing.At this time, he was no longer satisfied with being a speculator like a local rich man in the secondary market.He must have his own company strategy.Inspired by the company's senior participants, he put forward the Delong core concept of "creating new value in traditional industries".The concept believes that the global industrial structure is undergoing a huge evolution, and China is becoming the most important part of it. There are opportunities for rapid expansion in many traditional industries, but due to backward systems and concepts, most enterprises are small in scale , Scattered investment, no competitiveness.Therefore, if capital mergers and acquisitions are used to optimize and integrate them and revitalize the stock, this will be the hope for China's economic take-off.

Unlike Lu Liang and other market makers who purely rely on high-tech concepts to play with the stock market, Tang Wanxin believes that the biggest room for Chinese companies to develop lies in traditional industries.Only traditional industries can give full play to China's comparative advantages in labor and resources; only traditional industries are a mature and ready-made market, not a potential market; only traditional industries will not have too many uncertain factors. This is a theory that tries to justify itself.In a sense, it only exists as a reason for Deron's crazy expansion.Starting from this, Delong implemented diversified integration in the industry, carried out "unconventional" operations in the financial industry, and embarked on a path of fission development.

In the year of entering Beijing, Delong acquired 10.19% of the shares of Xinjiang Tunhe, which had just been listed, and became its third largest shareholder. Soon after, he increased capital and expanded shares and became the largest shareholder; Shenyang Asset Management Co., Ltd. purchased 29.02% of the shares of Shenyang Alloy and controlled the company; four months later, Delong reached an agreement with the Zhuzhou State-owned Assets Administration Bureau, the largest shareholder of the listed company Hunan Torch, to acquire Xiangtorch 25.71% of the shares.In just one year, Delong has successively become the controlling party of three listed companies and completed the acquisition task of the so-called "old three shares", which later became the most important industrial integration platforms of the "Delong family".

Tang Wanxin meticulously carried out industrial integration for the "troika" according to his own philosophy. Xinjiang Tunhe was originally a cement factory under the Xinjiang Construction Corps. It was founded in 1984. Although it was the first listed company in Xinjiang, it has been mediocre for many years.Therefore, Tang Wanxin resolutely decided to transform it into a "red industry".He successively acquired and built nine tomato paste processing factories, thus becoming the second largest tomato paste producer in the world, and the export volume of concentrated tomato paste accounted for 17% of the global trade volume.At the same time, the development of this industry temporarily solved the employment problem of 100,000 rural households in Xinjiang.

Shenyang Alloy was originally a professional manufacturer of nickel alloys, with an annual sales revenue of more than 40 million yuan and a profit of 6 million yuan.After entering, Delong successively acquired many electric tool manufacturing enterprises in Jiangsu, Shanghai, Shaanxi and other places, making it the largest professional manufacturer and exporter in the country.By 2000, the total assets of Alloy Investment (Shenyang Alloy Co., Ltd. was renamed Shenyang Alloy Investment Co., Ltd. in December 1999) increased from 133 million yuan to 1.398 billion yuan, an increase of 10 times. Business income increased to 844 million yuan, an increase of more than 15 times.Before Delong integrated the electric tool industry, China's output accounted for 70% of the world's total, but sales revenue accounted for only 10%, and the profit share was less than 1%. After the integration, China's bargaining power in the industry and export efficiency have been significantly improved.

Delong's transformation of the Hunan Torch is a classic work of the Tang-style integration concept.Before, this enterprise only produced a single variety of "spark plug".To this end, Tang Wanxin put forward the strategy of "big auto parts".He first acquired 75% of the shares of MAT, the largest brake system importer in the United States, and its nine joint ventures in China, thereby gaining a certain share of the U.S. auto parts import market; Domestic leading enterprises; followed by Hunan Torch issued announcements one after another, carrying out various reorganization and joint venture actions with Dongfeng Motor, Shaanxi Automobile Group, and Sinotruk Group.By 2004, Torch Hunan had more than 50 subsidiaries and became the largest enterprise in the three industries of gears, spark plugs and military off-road vehicles in China. It is also the second largest manufacturer of air-conditioning compressors and the largest exporter of automobile brake systems, etc. .

In the history of Delong, the industrial integration of the "troika" has been talked about by the outside world.Tang Wanxin thinks very highly of this, and believes that this is a corporate strategy of "the best in the world".Some economists also appreciated it. Zhong Pengrong, an economist who had close contact with the Tang Brothers, believed that "so far, few private entrepreneurs in China can achieve their heights." Objectively speaking, Deron's integration is indispensable. The "troika" are all state-owned enterprises in the traditional sense, with aging industries and backward management, and they only rely on listing to raise a sum of money to survive.Tang Wanxin not only comprehensively restructured the industry, but also spent money to hire international professional consulting firms such as McKinsey and Kearney to provide consultation for the company on the growth of professional managers, strategic design, and management reform, transforming them from "one piece of paper to the other" A company that can’t collect financial statements and has ideas but no rules” has transformed into a modern company with standardized management and vigorous vigor.In the future, Delong collapsed due to the financial crisis, but the "old three stocks" are still favored by the capital and industrial circles because of their clear industrial structure and good returns. This also verifies from one aspect that Delong's integration is not a failure.

From another point of view, the performance of integration is obviously suspected of being exaggerated and exploited. The industries in which the "Troika" is located—ketchup, power tools, and auto parts—are not areas with good growth and strong extension and radiation capabilities.Therefore, even if the integration is perfect, it will be difficult to achieve considerable profits and a large industrial scale in the short to medium term.In the year with the best benefits, the net profits of the three listed companies were 51 million yuan (Xinjiang Tunhe, 2002), 102.084 million yuan (Xiang Torch, 2002), and 70 million yuan (alloy investment, 2003). ), a total of only 223 million yuan, which is far from being a "miracle of benefits".In the process of integration, Delong has continuously released dazzling merger and acquisition announcements in the capital market, which are in fact just hype to raise the stock price.

There is also a fact that even Tang Wanxin did not expect, because the profits that the "troika" can contribute are limited, and they are all in industries that cannot generate a large amount of cash flow-a more important reality is that Delong It has never been able to qualify for additional issuance in the stock market by relying on good performance.Therefore, the performance of industrial integration cannot support the capital flow required for financial expansion.In the later stage, in order to support a huge and high-interest financing platform, Tang Wanxin was forced to withdraw funds from industrial companies and transfuse them into the financial sector.According to relevant statistics, this part of the capital transmission totaled more than 4 billion yuan.Therefore, its so-called "integration of industry and finance, two-wheel drive" effect has remained at the theoretical level and has never been truly realized.