Midea's "prince" invested in Gujia Home Furnishing with a loss of 2.8 billion yuan in half a year, and the founder cashed out on a large scale

PHOENIX WEEKLY

2024-07-19 11:18 Published on the official account of Beijing Phoenix Weekly

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01 Half a year after He Jianfeng, the only son of the founder of Midea Group, acquired the shares of Gujia Home, the share price of Gujia Home Furnishing fell by 32%, and the market value evaporated by 2.8 billion yuan.

02 Gu Jiangsheng, the founder of Gujia Home, set a market value target of 100 billion yuan in 2016, but his performance has fluctuated greatly in recent years.

03 Due to the downturn in the real estate industry, the home furnishing industry is facing involution, and Gu Jiangsheng began to cash out on a large scale.

04Although Gujia Home Furnishing is competitive in business, its expansion strategy has not delivered the desired results.

05 After He Jianfeng became the owner, Gujia Home Furnishing carried out executive appointments and equity pledge financing, and the possibility of realizing the dream of 100 billion yuan in the future remains to be seen.

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It has been half a year since He Jianfeng acquired the shares of Gujia Home. In the past six months, the stock price of Gujia Home Furnishing has fallen all the way, and the value of the only son of the founder of Midea Group has evaporated 2.8 billion in the capital market.

As of the close of trading on July 16, the share price of Gujia Home Furnishing fell to 24.88 yuan per share, down 32% compared with the equity trading price of 36.7187 yuan per share at that time.

In the first half of this year, the entire home furnishing industry in the capital market has experienced a difficult downturn, the home furnishing sector has fallen, and many stocks have hit new lows since listing.

In the first few years of equity transfer, the performance of Gujia Home Furnishing has been in the rising channel, this company started with sofas, has become the leader in the field of "soft home" in China, the product matrix has been broadened to sofas, soft beds, mattresses, whole house customization, mahogany finished home furnishings, etc., forming three core categories of sofas, mattresses, customization, software + customized product matrix.

"The world has IKEA, and China has a Gu family", Gu Jiangsheng, the helmsman of Gujia Home, a physical education teacher, once challenged IKEA when it went public in 2016. At that time, he had set a goal of exceeding 100 billion yuan in market value in 2026, and two years later, he proposed to exceed 100 billion yuan in revenue in 2028.

After another two years, starting from 2020, Gu Jiangsheng began a large-scale reduction of holdings and cashing. According to statistics, Gujia Group and its concerted actors have cashed out more than 10 billion yuan through equity transfer and secondary market reduction.

At the end of 2023, the Gu family will transfer its 29.42% equity to Infore Ruihe Investment, a company actually controlled by He Jianfeng, and since then this home furnishing leader has ushered in a new owner.

However, after He Jianfeng and Gu Jiangsheng advanced and retreated, where did the Gu family's 100 billion dreams go?

The largest deal in the home furnishing industry

At first, the total price of this equity transfer was as high as 10.3 billion yuan. However, on December 25, 2023, the transfer price will be adjusted to 36.7187 yuan per share, and the total price will be adjusted to 8.88 billion yuan, a decrease of 13%.

Even so, the deal still set a record for the largest equity transfer in the home furnishing industry.

In January this year, Gujia Home Furnishing announced that it had completed the equity transfer, He Jianfeng became the new actual controller of Gujia Home, and Infore Ruihe Investment (the full name of the company is "Ningbo Infore Ruihe Investment Management Co., Ltd.") became the new controlling shareholder of Gujia Home.

After the founder Gu Jiangsheng took away the rich equity returns, the Gu family changed his surname to "He" from then on.

However, from the perspective of the current equity relationship, the Gu Family Group, controlled by the Gu Family, holds 8.98% of the shares of Gu Family Home, and in addition, the Gu Family still holds 18.02% of the shares of Gu Family Home through concerted actors and some asset management plans.

In an announcement issued by Infore Group, it was mentioned that "Infore Group is full of confidence in the long-term development prospects of the home furnishing industry and the future development of Gujia Home Furnishing as an industry leader." As one of the important considerations of the acquisition, Infore Group highly recognizes the achievements of the professional management team led by Li Donglai, President of Gujia Home Furnishing. In addition, under the trend of "integration of household appliances", Midea and Gujia Home Furnishing behind He Jianfeng also have business synergies.

In fact, Gujia Home Furnishing and Midea Group have long had a lot of connections.

Infore specifically mentioned in the announcement of Gujia Home Furnishing President Li Donglai joined Gujia Home Furnishing in 2012, before that, he served as the vice president of Guangdong Midea Electric Co., Ltd. Under Li Donglai's matchmaking, a number of Midea executives have also joined Gujia Home Furnishing one after another, such as Vice President Li Yunhai, Ou Yafei, and Liao Qiang are all from Midea, which is also the initial time for Gujia Home Furnishing and Midea Group.

There is a saying in the market that Li Donglai pulled the strings for this equity transfer.

After Infore entered the Gu family, Gu Jia Home Furnishing experienced a new wave of executive appointments.

The new board of directors has been expanded from the original 5 to 9 directors, and among the 6 non-independent directors, three vice presidents of Infore Group, Su Bin, Kuang Guangxiong and Zhu Youyi, and the other three are members of the original Gujia team.

A GUJIA HOME FURNISHING PARTNER TOLD PHOENIX WEEKLY REAL ESTATE: "GU JIANGSHENG IS STILL THE CHAIRMAN AND IS STILL IN CHARGE OF THE BUSINESS. Looking at it now, Gujia's business has not changed much. ”

After He Jianfeng became a shareholder, he soon opened the road of equity pledge financing.

On March 2 this year, Ningbo Infore Ruihe pledged 157 million shares to the bank, accounting for 65% of the shares, the release date of the pledge is in 2031, the closing price of the day is 36.19 yuan / share, and the closing line is 20.26 yuan / share. In other words, the current stock price is close to the liquidation line after the pledge.

Although 2.8 billion has evaporated from the capital market, in terms of business, the competitiveness of Gujia Home Furnishing is obvious.

According to the performance report of Gujia Home, as of the end of 2023, it has more than 7,000 brand stores around the world, with the largest number of stores and the widest coverage in the soft home furnishing industry; In terms of overseas business, it has opened brand retail stores in India, Thailand and other countries and regions.

In 2023, its annual operating income will be 19.212 billion yuan, a year-on-year increase of 6.67%; net profit attributable to shareholders of listed companies was 2.006 billion yuan, a year-on-year increase of 10.70%. In the first quarter of this year, Gujia still maintained growth, with revenue up 10% year-on-year to 4.35 billion yuan and net profit up 5% to 420 million yuan.

But there are hidden concerns behind the performance rise. The first quarterly report shows that the net cash flow generated by its operating activities was -159 million yuan, a year-on-year decrease of 204.84%. Gujia explained that it was mainly due to the increase in procurement activities and salary activities in the current period.

Gu Jiangsheng's dream was shattered by 100 billion

In 2016, after Gu Jiangsheng signed the "Listing Agreement" with the relevant person in charge of the Shanghai Stock Exchange, the two hands clasped together, and then he came to the gong to start the journey of Gujia Home Furnishing after listing.

"We will leverage capital to achieve a new take-off of the brand." Gu Jiangsheng said at the bell ringing ceremony that his goal is to exceed 100 billion yuan in 2026, 10 years later. Two years later, Gu Jiangsheng has a new goal, that is, 10 years later, in 2028, the operating income will reach 100 billion.

This industry leader in soft home furnishings has also begun to expand since then.

In 2018, Gujia Home Furnishing launched nearly 10 brand mergers and acquisitions, including the acquisition of 99.92% equity of RolfBenz, Germany top sofa brand, 13.63% equity of NickScali, Australia export and retail furniture brand Italy, 51% equity of Natuzzi Trading (Shanghai) Co., Ltd., a subsidiary of Natuzzi, 51% equity of Xibao Home, and Xilinmen, the "first share of mattresses".

However, the radical expansion did not help Gu Jiangsheng realize his dream, but caused Gujia Home's performance from 2020 to 2023 to fluctuate very much. Its revenue increased by 14.17%, 44.81%, -1.81% and 6.67% year-on-year respectively; Net profit increased by -27.19%, 96.87%, 8.87% and 10% year-on-year.

And the performance of these acquired companies is not satisfactory.

In 2019, Gujia Home Furnishing received compensation of 5.6348 million yuan for the failure to meet the performance commitment of Sunwin Home Furnishing for the year, and in 2020, the book value of Goodwill of Gujia Home Furnishing was reduced from RMB 830 million to RMB 342 million, and the operating profit for the year decreased by 19.8% year-on-year, and the impairment of goodwill had a certain negative impact on the profit level. At the end of December 2022, Gujia Home Furnishing passed a resolution to transfer 51% of the shares of Xibao Home Furnishing acquired with 424 million yuan to the original shareholders for 161 million yuan, and at the same time accept performance compensation of 50 million yuan.

According to incomplete statistics, on July 6 and November 16, 2020, Gu Jiangsheng's parents made a profit of 3.72 billion yuan through the two equity transfers of TB Home Limited, and on July 23 and 24 of the same year, they reduced their holdings and cashed out about 124 million yuan through the secondary market.

On July 23 and 24, 2020, Gujia Group reduced its holdings of 9.8 million shares through the secondary market, cashing out about 532 million yuan. It also reduced its holdings of 2% of the shares of Gujia Home Furnishing through block transactions with TB Home Limited, cashing out 660 million yuan.

On June 22, 2022, Gujia Group reduced its stake by 1.97% through block trading, cashing out 800 million yuan.

With the impact of the downturn in the real estate industry, the home furnishing industry has to face a more "involution" industry status quo, finding the receiver to cash out may be the easiest and decent way, and whether this lofty dream of 100 billion yuan will be realized in the future seems to be less important to Gu Jiangsheng.

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