The recent announcement by Jindi Petroleum that it seeks to invest up to 4.2 billion yuan ($600 million) to acquire a 20% stake in ST Xinchao has turned heads in the corporate worldThis proposed acquisition not only aims to gain control over ST Xinchao but also signals the ongoing competition among investors eyeing the companyPreviously, ST Xinchao had attracted the attention of prominent figures, including Guo Jinshu, an influential coal magnate from Inner MongoliaShould Jindi's tender offer succeed, they would surpass Guo's Huineng Group and effectively position themselves as the dominant shareholder in ST Xinchao.

Jindi Petroleum's ambitions to take control of ST Xinchao have made headlines.

On January 21, ST Xinchao's stock opened with a surge, hitting the daily limit and resulting in its second consecutive winning session, closing at 2.46 yuan per share, making its market capitalization approximately 16.73 billion yuan.

On January 18, the company disclosed that Jindi United Holdings, a subsidiary of Jindi Petroleum, intends to acquire 1.36 billion shares of ST Xinchao via a tender offer – representing 20% of its total equity, at a price of approximately 3.1 yuan per share.

Current shareholders associated with Jindi Petroleum, namely Jindi Commercial and Jindi United Holdings, collectively hold about 15.9 million shares of ST Xinchao, which amounts to 0.23% of its total capitalIf Jindi's tender offer is completed successfully, they and their aligned shareholders will own 20.23% of ST Xinchao.

Behind Jindi Holdings is Lu Sikan, a relatively private businessman who is seldom seen in public

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Nonetheless, under his leadership, the firm has positioned itself as a notable player in Zhejiang's private enterprise sector, focusing on energy and real estateThe willingness to invest over 4.2 billion yuan into ST Xinchao denotes Jindi Holdings' financial strengthFurthermore, ST Xinchao’s core assets, which mainly comprise overseas oil and gas holdings, align well with Jindi Holdings' operational ventures.

It's important to note Guo Jinshu's interest in ST XinchaoHis company, Huineng Investment, along with its aligned parties, currently holds approximately 20.05% of ST Xinchao's sharesNevertheless, due to compliance issues regarding stock purchases, a substantial portion of Huineng's shares may face restrictions on voting rightsHuineng Investment indicates that it has no immediate plans to divest from its stakes, complicating the landscape for ownership control.

Should Jindi Holdings successfully absorb shares from other stockholders, it would mean a significant shift, placing the Jindi faction above Huineng in terms of ownership stakesMoreover, Jindi Holdings openly indicated their strategic intent to secure control over ST Xinchao via this acquisition.

Jindi Petroleum’s proposal involves an investment of 4.2 billion yuan

To gain control of ST Xinchao

ST Xinchao has become a hot target for various capital players.

On January 18, ST Xinchao issued an announcement confirming Jindi Petroleum's offer to acquire shares from all shareholders, excluding itself and aligned parties, proposing to buy 1.36 billion shares, or 20% of the total shareholdings, at a price of 3.1 yuan per share.

Calculating the total investment, if the acquisition goes through, Jindi Petroleum’s maximum expenditure is set to be around 4.216 billion yuan

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The purchase price represents approximately a 39% premium over ST Xinchao’s closing price of 2.23 yuan on January 17.

The announcement further clarifies that Jindi Petroleum is a wholly-owned subsidiary of Jindi HoldingsCurrently, its aligned joint ventures collectively hold 15.9 million shares of ST Xinchao, constituting 0.23% of total capitalUpon acquisition completion, Jindi Petroleum and its aligned parties would emerge as the largest shareholders with a 20.23% stake.Looking ahead, the acquisition, while primarily driven by Jindi Holdings, will represent a significant shift within the company's ownership structure.

It is noteworthy that Jindi Petroleum was only established on December 27, 2024, emphasizing that the tender offer decision is effectively executed by Jindi HoldingsThe parent company has made it clear that this acquisition is part of its strategic plan to strengthen control over listed companies and enhance their shareholding stability.

Moreover, the aspirations of Jindi Holdings towards ST Xinchao are not without precedent; past attempts from Guo Jinshu to gain shares further underscore the competitive landscape surrounding the company.

In August 2024, Huineng Group’s wholly-owned subsidiary, Huineng Investment, also announced intentions to acquire a controlling interest in ST Xinchao, proposing a staggering 9.698 billion yuan for 3.128 billion shares, or 46% of the total equityHowever, due to suspicious disclosures related to aligned actions, their attempt ultimately failed.

In a detailed rights change report published by ST Xinchao in November 2024, it was detailed that Huineng Investment and its aligned parties collectively owned 20.05% of the shares

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However, regulatory violations related to stock purchases mean they have limited access to voting rights concerning most of these sharesTheir plans indicate no intentions to increase holdings in ST Xinchao within the next 12 months.Should Jindi's acquisition involve shares from other stakeholders, the Jindi faction stands to regain leadership based on its ownership percentage.

Jindi Holdings boasts assets exceeding 28 billion yuan

and is keenly poised for growth.

But who exactly is this Jindi Holdings that is willing to inject such substantial capital into ST Xinchao?

ST Xinchao's disclosures reveal Jindi Holdings was founded in 2002, headquartered in Hangzhou, Zhejiang, and run by Lu SikanCurrently, the controlling stakeholders of Jindi Holdings are Lu Sikan and his spouse, Kong Lielan.

Lu Sikan maintains a low profile and is rarely seen at public eventsHis background is rooted in the home furnishings industry before he ventured into real estate and energyUnder his direction, Jindi Holdings has made investments in companies like China Oil and Gas, where he briefly served as chairman.

At present, Jindi Holdings focuses heavily on energy and real estate, dealing in real estate development, park operation management, clean energy services, and petrochemical trade among other verticals

The company has received multiple accolades including “China’s Top 500 Service Enterprises” and “Top 500 Private Enterprises.”

By the end of 2024, Jindi Holdings had total assets of 28.334 billion yuan, net assets amounting to 6.333 billion yuan, with annual revenues of 7.182 billion yuan and a net profit of 118 million yuan.

According to Jindi Holdings' official website, the group owns oil and gas assets in Indonesia and ChadIts petrochemical trade business is managed through Zhejiang Jindi Petrochemical Energy, primarily focusing on large-scale trade in resources including chemicals and fuelsIn 2019, Jindi Petrochemical also established a joint venture with Hangzhou Industrial Group for premium commodity trading.

In addition to its energy ventures, Jindi Holdings' real estate arm is thriving, having previously made several notable land acquisitionsFor instance, in June 2023, Jindi Real Estate secured a parcel known as “Yinhu Dacaoping” for 834 million yuanIn September 2022, they partnered with Binjiang Group to acquire a plot in Xiaoshan District for 1.931 billion yuan.

Currently, the company boasts residential projects like “Jindi Hongbin City” and “Jindi Huwanglu,” signaling its strong presence in the real estate marketplace.

Interestingly, Jindi Holdings has already made its foray into the A-share marketIts wholly-owned subsidiary, Hangzhou Jindi Commercial Management, appeared unexpectedly among the top ten shareholders of Huina Technology in 2024, possessing 5.053 million shares or 4.21% of the total equity.

What makes ST Xinchao so alluring?

What qualities have attracted both Huineng Investment and Jindi Holdings towards ST Xinchao?

Records indicate that ST Xinchao primarily engages in the exploration, development, and sales of oil and gas

The company has acquired valuable overseas oilfield assets in Texas, USA, including the Hoople oilfield and the Howard and Borden shale oil fields which are relatively high-quality holdingsAs of mid-2024, its overseas assets are valued at approximately 35.395 billion yuan, accounting for an impressive 99.9% of total assets.

Information from Jindi Holdings indicates that they are proactively pursuing overseas oil and gas opportunities, showcasing their alignment with ST Xinchao’s business model.
Additionally, performance metrics for ST Xinchao are noteworthy, with annual revenues hovering around 9.357 billion yuan in 2022, dipping to 8.849 billion in 2023 and showing signs of recovery in 2024 with a projected income of about 6.43 billion yuan in the first three quartersAcross less than three years, ST Xinchao has generated considerable earnings totaling 7.38 billion yuan.

Furthermore, the company’s financial health is promising; by the end of the third quarter of 2024, its cash reserves stood at 3.008 billion yuan, with a debt-to-asset ratio of only 36.46%.

However, due to glaring internal control deficiencies, the company faced penalties in April 2024, significantly impacting its stock performanceA downward spiral saw its share price plummet to 1.43 yuan on June 12, marking a 40% drop during that tumultuous period.

Moreover, continuous profitability shrouded by a long-standing absence of dividends has drawn significant criticismData from Wind shows that since its listing, ST Xinchao has garnered an impressive fundraising total of 12.977 billion yuan, yet has distributed only 92.158 million yuan as dividends

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