Why did the Shanshan Group "contract a boat to the sea"?

The Shanshan Group announced that it will transfer 28% of the company's shares to Itochu Corporation of Japan and plans to “go a boat to sea” to implement an internationalization strategy. In the case of a sharp decline or even a negative growth in the export of China's garment industry, Shanshan Group's move has attracted much attention in the industry. When Zheng Yonggang, the founder of Shanshan Group, was interviewed by the Xinhua News Agency reporter, he frankly stated that the development of the company has encountered a “ceiling” and that the purpose of the transfer of equity is to use the advantages of foreign capital management and resources to help Shanshan Group become an “integrated trading company”.

Encountered "ceiling" and worried about the personal color of the company is too strong

Affected by the appreciation of the renminbi and the financial crisis, in 2008 the export trade of the domestic textile and clothing industry was inhibited and sales volume shrank sharply. According to the statistics of the First Textile Network, the impact of Chinese clothing exports was even more pronounced, with a growth rate of only 2.41%. The year-on-year decline was 18.26%. If the devaluation of the renminbi is deducted, the entire industry should export negatively. Zheng Yonggang told reporters that Shanshan Group’s turnover in 2008 reached 11.8 billion yuan, an increase of 5.3% compared with the turnover of 11.2 billion yuan in 2007. Taking into account the impact of the financial crisis on the entire apparel industry, it is not easy for Shanshan Group to maintain stability. .

However, the slowdown in growth has caused Zheng Yonggang to clearly feel the "ceiling" of the company's development. "Maybe 10 years after the Shanshan Group's turnover is still 11.8 billion yuan, or even less," and Zheng Yonggang's goal for the Shanshan was By 2010, the turnover will reach 20 billion yuan. By 2018, the scale of corporate assets will reach 100 billion yuan.

"When a good boss has an aging knowledge structure, relying on me to solve the international development of the company to break through this invisible ceiling is no longer enough." Zheng Yonggang said that if the company is compared to a child, he is only a "high school teacher." Now that the child is big, you need to ask the "university professor."

In addition, Shanshan Group currently controls two listed companies, one is Shanshan (600884.SH) and the other is Zhongke Yinghua (600110.SH). In order to dilute the color of the family business, Zheng Yonggang does not serve as chairman, but Let Zheng Yonggang worry that the "patriarchal system" has not faded as a result. The chairman of the two listed companies still has to consult Zheng Yonggang to make a decision. The following people are still accustomed to seeing the boss's complexion.

It is precisely this predictability and pressure that Zheng Yonggang and the board of directors have made a decision to transfer equity to strategic investors, improve the company's management structure, and implement the overseas expansion plan by “borrowing to sea”.

"Selling" assets actually increases "soft power"

After nearly a year of negotiations, Shanshan Group finally chose to sell 28% of its shares to ITOCHU Corporation of Japan. According to Japanese media reports, ITOCHU Corporation invested 10 billion yen (approximately 746 million yuan) in this acquisition. However, both Shanshan Group and ITOCHU are unwilling to disclose the specific amount of this acquisition. Zheng Yonggang said that the price of the sale of equity was not calculated based on market value, but was transferred to the Japanese strategic investor based on the net book value. Therefore, outsiders commented that Shanshan Group “selling” assets.

Japan's ITOCHU Corporation has started as a textile company for more than 150 years. Its main business involves trade and finance-related businesses, project investment, etc. It is currently the world's largest textile seller with more than 100 well-known clothing brands and 75 in the world. The country and region have more than 800 subsidiaries and branches, and it is also Japan's most influential integrated trading company.

Zheng Yonggang said that Shanshan Group and Itochu have started cooperation in the apparel industry since the early 1990s and established a joint venture company. Currently, Shanshan Group still does OEM work for several clothing brands under ITOCHU. The future strategic positioning of Shanshan Group is also an integrated trading company-type enterprise. In cooperation with ITOCHU, it is determined by its strict and scientific corporate management system and its high quality and efficient global resource allocation capabilities.

"Itochu's textile fiber business alone achieved sales of 11.7 billion U.S. dollars, both in terms of sales channels and technology, and it is possible to share Itochu's 150 years of operating experience, which is also costly to buy." Zheng Yonggang said that the introduction of the world's top 500 companies is mainly to improve the company's core competitiveness, create a Chinese-style trading company model, open up the joints of the industrial chain, and become the organizer of the industry. "What we want is not capital, but 'soft power', and we must not stick to existing business because of short-sightedness."

According to Zheng Yonggang, ITOCHU Corporation currently has 4 individuals entering the Shanshan Group's management team and starting the docking business. Zheng Yonggang said that the cooperation between the two parties is not limited to the apparel industry. ITOCHU is a global company with a wide industrial layout in various industries such as textiles, brands, energy, chemicals, finance, and import and export, and it is complementary to Shanshan in many industrial fields. The opportunity for cooperation will greatly benefit Shanshan Group's diversification and overseas expansion.

The cooperation between the two parties is not without a "firewall." Zheng Yonggang told an exclusive Xinhua News Agency reporter that the Shanshan Group and ITOCHU actually signed a "gamble" agreement. If three years later, if ITOCHU participates in the operation, the Shanshan Group fails to achieve its goals, Then Shanshan Group can unilaterally propose the original price to buy back equity. As a "stakeholder" party, three years later, if Itochu believes that he can not integrate into the management of the Shanshan Group or because of a lack of corporate culture, he can unilaterally propose the transfer of equity at the original price.

Contrary to attack, still need policy to back up

Jiang Hengjie, executive vice president of the China Garment Association, said in an interview with Xinhua News Agency on the 17th that the strong alliance model between Shanshan Group and ITOCHU is rare in China and that the two parties have contributed to this strategic investment on the basis of long-term cooperation. It is difficult for other apparel companies to have such an opportunity to attack the market.

Jiang Hengjie said that one is the world’s top 500 companies, one is the Mainland’s top 500 companies, one is focused on the Chinese domestic market, and the other is eager to implement overseas expansion strategies. The cooperation between ITOCHU and Shanshan Group is all they need. Shanshan Group's "borrowing to sea" can effectively reduce the cost and risk of internationalization. It is of great significance for the entire garment industry to "go global." Government agencies should also take substantive measures to encourage powerful companies to create international influence.

Jiang Hengjie expects that in 2009 the market will emerge a new round of survival of the fittest and the garment industry is facing a complete reshuffle. Garment companies that do not have their own brands, sales channels, or lack of control over the market may be out of control. This textile and garment enterprises should remain sober-headed. The measures introduced by the state, including raising the export tax rebate rate, are only extraordinary measures in a special period. From the perspective of long-term development, textile and garment enterprises can only achieve the development plan by upgrading. Jiang Hengjie proposed three suggestions to garment enterprises: First, we must go against the trend and expand the cost in the downturn of the industry. Second, we must be born out of the door to create a strong influence. Third, take the market and create your own. Brand.

Jiang Hengjie said that at present, China’s garment enterprises are small in size, and relying on their own strength to go overseas to go it alone is not yet mature. It is a relatively mature and effective way for the government to organize organizations to “attack”. Some localities in Guangdong Province have recently introduced measures to subsidize overseas enterprises that participate in international fashion shows and open clothing stores. This specific policy guarantee will allow “going out” to stop at the level of “chanting slogans”.