On October 11, Gome issued an announcement stating that on the day it entered into a framework agreement with Gome Management, Gome will manage the five subsidiaries of Gome, including Gome Home, Shared Co-construction, and Anxun Logistics And Gome Jiao Zang (the above-mentioned companies collectively referred to as the "target company") provides management services for a period of three years. According to the framework agreement (including individual agreements), Gome has also been granted share options, which will be exercised by Gome at its discretion for the three years ending December 31, 2024 to acquire equity in the target company.

In this announcement, Gome explained in detail the reasons and benefits of this move, involving strategic significance, market value enhancement, and valuation reconstruction. In terms of capital operation, the company is even more blunt. The signing of this framework agreement is expected to bring about a substantial increase in the group' s transaction scale and platform income, which is conducive to the mature development of various business sectors. "When the time is right, the group will consider splitting the electrical supply chain from the group and independently conduct capital operations."

On the morning of October 12, the reporter learned from Gome that on the day of the aforementioned announcement, it held a foreign exchange meeting, and Huang Guangyu himself appeared to participate. According to Fang Wei, CFO of Gome Retail, in the future, as long as the company' s third-party service capability in the home appliance business chain reaches more than 30% of Gome' s total retail revenue and meets the criteria for independent listing, it can consider splitting Gome' s electrical appliance business for independent listing.

Custody of the assets of major shareholders

According to public information, Gome Management is a limited liability company incorporated in Hong Kong and was wholly-owned by the controlling shareholder Huang Guangyu on the date of the announcement. It is mainly engaged in investment holding. The target companies are subsidiaries or associates managed by Gome.

According to the announcement issued by Gome, it has entered into a framework agreement with Gome Management, which will provide three-year management services for Gome Home, Shared Co-construction Platform, Anxun Logistics and Gome Cellar, including business management services and improved business management. Training for the target company’ s employees, content related to management systems, processes, methods and sales skills; recruiting services for experienced personnel to operate the business; business-related training, assistance and advice provided by the target company or referrals by independent consultants, etc. 

The announcement also pointed out that during the framework agreement period, Gome will charge the target company a service fee, and at the same time have the right to receive equity awards from the relevant target company, as well as preferential options for up to 30% of the shares and preemptive rights for the remaining shares.

The reporter noted that in 2017, Gome clearly put forward the "Home·Life" strategy, and now it has entered the accelerated landing period of the second phase of Gome' s "Home·Life" strategy.

Gome Retail stated in the announcement that the target company covers the "one store with multiple functions" offline display scene, home improvement, home furnishing, logistics and distribution, wine and other business areas and the corresponding operating entities. "Life" strategic business is highly compatible, and it is expected to produce better synergies.

"First, through the synergy between the target company and the group’ s business, it is expected to bring significant increases in the group’ s traffic, and at the same time bring considerable operating income to achieve a win-win distribution; secondly, through the entrusted management of the target company, the group The full-link supply chain is optimized. The grid and digitization formed by online and offline integration have enabled the group’ s sales to increase significantly and costs have been further reduced, so as to better give back to consumers and suppliers, and further encourage the group Increase the number of merchants and members, and develop a more open platform ecology and resource network."

"After the announcement, our agreement has been implemented, and the delivery period has entered. Once the delivery is completed, we will enter a comprehensive custody management." Fang Wei revealed in a summary of yesterday's meeting given to reporters by Gome.

When talking about the original intention of hosting the aforementioned price companies, Huang Guangyu also responded. "It turns out that we thought that the initial investment in these businesses was quite large. After a year of advancement, we have done a lot of things. After seeing these steps, although the risks are with me now, the interests are in the listed company Gome, and I am optimistic about the losses. Let’s buy again. From the point of view of shareholders, we want to have a great opportunity..." He said frankly that cooperation is 1+1 greater than 2. These platforms can form a closed-loop business chain, which is also very important scenes.

Regarding the reasons and benefits of signing the aforementioned framework agreement, Gome pointed out that it currently has online real happiness platforms, offline store displays, and electrical appliance supply chains. Some new commercial formats include Gome Home, Shared Co-construction and other target companies. Operated by the controlling shareholder. In order for the group to strategically form an ecological cycle, to create a full-link, full-model and full-retail development, while avoiding operational risks and future capital investment issues, after negotiation and negotiation with the controlling shareholder, the controlling shareholder is willing to bear related risks and adopts entrusted management. In this way, the target company is entrusted for management. At the same time, Gome also won more rights. "This entrusted management will not have to bear operating and capital risks for the group while forming a complete cycle of ecology, and enjoy risk-free returns."

Proposed spin-off business listing

In yesterday’ s announcement, Gome also mentioned specific meanings in terms of market value and valuation.

At the level of market value improvement, it said that relying on its rich operating experience in online, offline, supply chain, logistics, big data, etc., providing management services in accordance with the framework agreement will help output such operating experience and realize soft power. The target companies entrusted to manage this time are all on the fast-developing industry track and are expected to complete the established performance targets in the future; through the entrusted management period, the above-mentioned service fees, equity awards, share options, and preemptive acquisition rights are collected, which are expected to be granted to them Bring a substantial increase in valuation.

In terms of valuation reconstruction, Gome admitted frankly that the entrusted management of the target company enables the various systems of the target company to be fully integrated and integrated, which brings strong traffic blessing to the online real happiness platform and enjoys the benefits brought by the traffic. A series of synergies are expected to greatly increase the group' s traffic and bring considerable operating income at the same time. In addition, through synergies at the business level, the provision of equity incentives and the acquisition of equity options in the target company will upgrade from a company that is fundamentally dominated by a supply chain to a platform-led company with supply chain capabilities, which is conducive to the overall valuation, significantly optimized and comprehensively improved.

In addition, in terms of improving operational capabilities and efficiency, it is said that this framework agreement is expected to greatly enhance the ability of Gome to obtain traffic at low cost and high efficiency, thereby reducing the operating costs of B-side suppliers and ultimately enabling C-side consumers Benefit.

Fang Wei said that after the transaction, the listed company will be upgraded from the original supply chain leading company to a platform leading company with supply chain capabilities. In the future, the valuation of the Gome listed company will need to be generated after the five major asset escrows are added to the existing business. The increase in market value and the sum of the increase in synergy. "In the next three years, we hope to bring a market value increase of 100 billion yuan to listed companies. After the completion of the custody, the company's existing business and the five major asset packages will not develop independently, but are highly coordinated like gears..."

It is worth noting that Gome also mentioned capital operations in the announcement. The company said that the signing of this framework agreement is expected to bring about a substantial increase in its transaction scale and platform revenue, which is conducive to the mature development of various business sectors. When the time is right, Gome will consider splitting the electrical supply chain and conduct independent capital operations.

According to Fang Wei’ s statement, a part of Gome’ s overall retail revenue comes from the home appliance supply chain system. “This part of the home appliance supply chain is currently not only developing on the existing online and offline platforms, but also exporting. The chain has been exported to channels like Jingdong, Pinduoduo, etc., so now the home appliance supply chain is constantly serving Gome, operating on Gome’ s entire platform, and also operating on other platforms, and third-party capabilities are getting stronger. We believe that with the more efficient development of the Gome platform, now that the third-party capabilities of home appliances are getting stronger, there will be an opportunity for independent listing at an appropriate time."

In addition, in the minutes of the aforementioned meeting, Huang Guangyu also responded when asked whether the aforementioned five companies will go public separately and whether they have financing plans. "Regarding whether it will be demolished and listed independently, we hope to achieve it as soon as possible. In this case, the business path will be very clear, and the value will return. In addition, it will also be of considerable help to the business. If possible, we even hope to do it from now on."

Regarding the aforementioned actions of Gome, Wang Guoping, a member of Linkshop' s senior advisory group, pointed out to reporters that companies mainly proceed from the valuation level. "Injecting controlling shareholder profits is conducive to increasing the story richness of (listed companies). On the one hand, it increases profits and on the other hand, it increases the valuation to achieve the purpose of increasing the overall market value. The supply chain is due to the low valuation of the supply chain. With the introduction of sector custody, Gome has turned from a supply chain company to a platform company, enjoying the valuation of the platform sector."

According to the reporter' s understanding, on February 20 this year, Huang Guangyu made a public speech for the first time since his return and said that he must strive for 18 months to restore Gome' s original market position.

"On the 18-month matter, we were pushing back time as an internal strategic plan at the time, not a commitment to the market." Huang Guangyu said this time that in terms of progress, it was indeed a bit slower, but the direction and path have not changed, more and more confident. "I don't care too much about 18 months. This rhythm must be done more scientifically... Please rest assured, we will try our best."