China Material Asset Restructuring: GvW Graf von Westphalen advises Truking Group on Restructuring

On 30 September 2020, the Shenzhen Stock Exchange (SZSE) approved the application of Truking Technology Co., Ltd for what is known as a Material Asset Restructuring (MAR). This is the first major restructuring project under PRC law approved by the SZSE since the introduction of the new registration-based IPO system for ChiNext. ChiNext is a NASDAQ-style stock market designed, among other things, to enhance access to equity capital for innovative, fast growing businesses, in particular high-tech companies.

If assets are acquired by a listed Chinese company, this may qualify as an MAR under PRC law and consequently the proposed transaction in its entirety may require approval by the China Securities Regulatory Commission (CSRC) or by the relevant stock exchange. If assets falling within the definition of Material Assets (e.g. an equity interest in a company) are acquired by a non-listed company and transferred to a listed group company at a later point, this restructuring may be regarded as a Material Asset Restructuring and may also be subject to approval, as was the case here.

The aim of the restructuring is to facilitate access to new investor capital by issuing Truking Technology shares and convertible bonds. As part of the MAR process, Truking Group (acting through the German company Truking Europe GmbH) also acquired the remaining 24.9% interest in Romaco Holding, some three years after its original acquisition of the absolute majority in the holding company of Romaco Group in 2017 (For more information, please click here.). In both cases, Deutsche Beteiligungs AG (DBAG) or DBAG investment companies acted as seller. The acquisition of the outstanding shares facilitated and accelerated the MAR process.

Truking Technology is a leading manufacturer of pharmaceutical equipment in China. Romaco Group is headquartered in Karlsruhe, Germany, and is a well-known manufacturer of a full line of automated solids dosing systems in Europe with an annual turnover of over EUR 160m.

As long-standing German legal advisors to Truking Group, GvW Graf von Westphalen provided extensive and comprehensive legal advice throughout the MAR process, including on the acquisiton of the 24.9% interest in Romaco Group from DBAG. For the successful completion of the approval process in China, which was supported by Advisor Sino Link Securities as lead financial advisor, GvW carried out an extensive due diligence review of the German companies of the Romaco Group and drew up detailed reports for submission to the CSRC and the stock exchange, respectively. The volume of data and information that had to be collected and reviewed for this purpose was significantly different from what is usually reviewed as part of a purchaser due diligence exercise.

GvW’s long-standing client Truking Technology was advised by a multi-locational team headed by Dr Marco Zessel (M&A/China Practice, Frankfurt am Main) and consisting of Ming Yi (M&A, China Practice, Frankfurt am Main, as co-head), Karsten Kujath (Employment Law, Frankfurt am Main), Dr Kristofer Bott (IP, Frankfurt am Main), Andrea Torka (Real Estate, Frankfurt am Main), Christian Kusulis (Antitrust Law, Frankfurt am Main), Arnd Böken (IT and Data Security, Berlin), Tom Kleine Jäger (IT and Data Security, Frankfurt am Main), Marian Niestedt and Nina Kunigk (International Trade Law, Hamburg) and Dr Joachim Mulch (IP, Düsseldorf).