If everything goes as planned, Jiangsu Phoenix Publishing & Media Co., Ltd., with a high price-earnings ratio of 63.4 times, will be listed on the Shanghai Stock Exchange on November 30th in the morning. The company will issue 509 million shares publicly and raise up to 4.048 billion yuan.
After its listing, with a total share capital of 2.5449 billion shares, Phoenix Media will become the largest listed company in the cultural media sector of the capital market, with an issued market value of up to 25 billion yuan. It is also the largest book distribution and sales company in China currently, with assets and sales exceeding 10 billion yuan RMB, making it the leading company in the industry.
Why can a regional cultural enterprise like Phoenix Media grow into an industry leader and the largest market value company? What are its corporate reform and listing paths?
On the eve of Phoenix Media's listing, reporters from the China Economic Times delved deep into the company. More than ten people, including ordinary employees, middle-level leaders, senior executives, and the chairman, were interviewed to gain a comprehensive understanding of its growth process, corporate reform, and IPO journey.
Phoenix Media inherits all publishing and distribution main business assets from its controlling shareholder, Jiangsu Phoenix Publishing & Media Group Co., Ltd. Its main business includes the publication, distribution, and sale of cultural products such as books and audiovisual products. Among them, book publications mainly include textbooks and general books (including teaching aids). The company has 80 wholly-owned subsidiaries (including 9 publishing house companies and 66 regional Xinhua Bookstore subsidiaries), 4 controlled subsidiaries, and 3 participating companies that engage in publishing and distribution businesses and cultural product sales.
Phoenix Media is also the only book publishing and distribution enterprise in China so far that has achieved cross-provincial overall reorganization. In September 2009, through an increase in capital, it completed the reorganization of Hainan Xinhua Bookstore Group, becoming the first provincial distribution enterprise in China to achieve overall cross-provincial reorganization. This event was hailed as a landmark in the development history of China's book industry. Chairman Chen Haiyan of Phoenix Media also revealed to this reporter that within the next year, Hainan textbook publishing company will be injected into Phoenix Hainan Xinhua Company.
IPO Review: CSRC unconditional approval
"Everyone knows that it is very difficult for a company to pass the review meeting; even if it passes, more than 90% of companies do so conditionally; while Phoenix Media is one of the few companies that passed unconditionally," said Zhou Bin, General Manager of Phoenix Media and member of the Party Committee of the Group, proudly starting the topic with the smooth passing of Phoenix Media's review meeting.
From the website of the China Securities Regulatory Commission (CSRC), it was learned that on October 24, Phoenix Media passed the CSRC issuance examination committee; on November 22, it opened public subscription to investors; and by the 30th, it would list and trade, with online instant communication.
"Because China implements a review system, in the cases of enterprises' public issuance and listing, Phoenix Media's listing is one of the few relatively smooth ones, taking only one month from submitting materials to listing," said the secretary of the board of several companies that have passed the review but are still waiting for the CSRC approval documents.
According to information obtained from the CSRC website, there are more than 20 companies that passed the review before Phoenix Media and received approval but have not yet obtained the listing approval document, including Shaanxi Coal Industry on August 29 and China Communications Construction on September 23.
"We could get unconditional approval from the CSRC and complete the listing process so quickly mainly due to our corporate reform. Phoenix Media's corporate reform was done seriously and solidly. We spent five years on the reform before going public today," said Zhou Bin.
It is understood that since 2006, the Xinhua Bookstore Group under the group company has started work on corporate reform and listing, once submitting a listing application to the CSRC in 2009. However, because the publishing assets were not listed, involving too many related-party transactions, the CSRC required the company to improve its industrial chain before listing again.
Corporate Reform: A Painful Process
"We spent five years on the corporate reform, and the process was extremely painful," said Zhou Bin.
Phoenix Media's reform was one of the earliest in China, starting in 2003 with the transformation of its distribution assets - Xinhua Bookstore. Wang Zhenyu, Director of the Comprehensive Office of Phoenix Media, told the China Economic Times.
According to public information, the predecessor of Phoenix Media was Jiangsu Xinhua Bookstore Group Co., Ltd., which was established on April 2, 1999. On June 30, 2009, it was reorganized into Jiangsu Phoenix Xinhua Bookstore Industry Co., Ltd. via an overall change method.
During the reform process of the Xinhua Bookstore Group, Hongyi Investment, a well-known domestic PE investment institution, was introduced as a strategic investor. On May 26, 2008, the publishing group and Hongyi Investment signed the "Jiangsu Xinhua Bookstore Group Co., Ltd. Capital Increase Agreement," agreeing that Hongyi Investment would make a premium capital increase of 4.8146 billion yuan to the group company based on the evaluation results of the "Asset Evaluation Report" No. [2008] No. 171 issued by Zhonglian on May 10, 2008. The publishing group and Hongyi Investment held 90% and 10% of the equity in the Xinhua Bookstore Group Company respectively, with the publishing group holding 1.35 billion shares and Hongyi Investment holding 150 million shares.
"Our original plan was to go public after transforming the book distribution assets of Xinhua Bookstore. However, because the listing requires restrictions on related-party transactions, where transactions with the controlling shareholder cannot exceed 30%, the CSRC required us to solve the related-party transactions with the book publishing part of the assets, preferably listing both publishing and distribution assets together," said Wang Zhenyu.
In 2010, the controlling shareholder, Phoenix Group, adopted the method of injecting publishing assets entirely, solving the problem of related-party transactions.
The competent department's "Approval on Agreeing that Jiangsu Phoenix Publishing & Media Group Co., Ltd. Increases Capital in Jiangsu Phoenix Xinhua Bookstore Industry Co., Ltd. with Publishing Main Business Assets" (Su Cai Zi [2010] No. 101) was approved. In December 2010, the publishing group increased capital in Jiangsu Xinhua Bookstore Industry Co., Ltd. with the equity of 12 companies including Jiangsu People's Publishing House Co., Ltd. and publishing main business assets. After this capital increase, the total share capital of the company increased to 2.0359 billion shares, among which the publishing group held 1.8859 billion shares, accounting for 92.63%, and Hongyi Investment held 150 million shares, accounting for 7.37%.
On December 28, 2010, Jiangsu Phoenix Xinhua Bookstore Industry Co., Ltd. was renamed "Jiangsu Phoenix Publishing & Media Co., Ltd."
Reform: Truly Breaking Through the "Public Institution, Enterprise Management" Model
In recent years, the book publishing industry has accelerated the pace of corporate reform and listing financing. Successive enterprises such as Xinhua Media, Xinhua Wenhuan, Northern United Publishing Media, Times Publishing, Wanxin Media, Jiangxi Publishing, Central South Media, etc., have completed corporate reforms and listings.
In 2003, the State Council promoted pilot cultural system reforms, and some enterprises' corporate reforms played a good demonstration effect. However, this pilot reform still had significant limitations, with corporate reforms generally incomplete. Most cultural enterprises remained within the original "public institution, enterprise management" model. Many people worried that after transforming into an enterprise, their original administrative identities and ranks would disappear, affecting their treatment and benefits, especially retirement benefits. Some cultural units also worried that after losing the protection of their public institution status and being cast into the market to participate in competition, they lacked confidence.
Through multiple interviews, this newspaper learned that the difficulties in media enterprise reforms mainly manifested in three aspects: first, the problem of changing mindset; the success or failure of media reform hinges on people, especially the awareness and determination of management towards capital operations, directly impacting the progress of media enterprise reforms and listings; second, the difficulty of asset and business division; third, the challenge of personnel placement.
For Phoenix Media, the problem of incomplete reform also existed. During the interview at Phoenix Media, this reporter met two employees in the same position (names withheld upon request), one being a new employee who joined after the corporate reform, and the other being an old employee. They performed the same work within the company, but their treatments differed by several times.
"The company employees are divided between those inside and outside the system. Those inside not only have much higher salaries and benefits than us, but also better medical care and social security," the aforementioned new employee told the reporter.
When asked about the transformation of management's mindset in cultural enterprises, Phoenix Media's General Manager Zhou Bin gave the following response: Before serving as General Manager of Xinhua Bookstore Group from October 2000 to November 2007, he served as Deputy Director of the Jiangsu Provincial Press and Publication Bureau. Now, he claims to have completed the transition from government official to enterprise manager.
"Transitioning from a government official to a company executive, these two identity transitions allow me, as an administrative official, to view problems from the perspective of industry trends and macro policies, which is different from viewing problems from a single point as an enterprise does. In the past seven years, serving in administrative positions in government departments has made me consider problems comprehensively, combining macro and specific micro perspectives, allowing me to see problems more clearly and accurately. The pragmatism of enterprises and direct contact with the market have also enhanced my ability to solve specific problems," Zhou Bin said when describing his career history. "Considering current work requirements, from strategic planning formulation, key tasks to future considerations, it not only does not allow me to be conservative, but also fully follows the macro trend of cultural development and the industry, setting relatively high requirements. Currently, we are working very passionately, not conservatively, actively seizing opportunities. From these few years, apart from considering the investment risks and financial risks of the enterprise itself, we rarely consider other factors, including my colleagues, who don't think this way either, but instead self-position themselves as managers of an enterprise."
As General Manager, Zhou Bin is not only a witness but also an operator of Phoenix Media's corporate reform and listing, with profound experiences and rich experiences in cultural enterprise reform.
He advises other media enterprises undergoing or about to undergo reform: "First, listing is just a phased goal. More importantly, it is to sustain the enterprise and make it stronger and larger. Strictly follow the requirements of modern enterprise systems in the reform, never take shortcuts or harbor侥幸lucky thoughts. Phoenix Media took five years from initiation to realization of listing, a very arduous process. Second, truly transform concepts and identities. Many colleagues of Phoenix Media were originally government staff. After entering the enterprise, the 'iron rice bowl' was broken. Only by making the enterprise stronger and larger can there be rank and position; if the market and investors do not recognize, there is no rank."
Concept Transformation: "The editor-in-chief is equivalent to the plant manager"
"After corporate reform and listing, shedding burdens unsuitable for market development, removing outdated and backward ideas, smoothing out enterprise development mechanisms, clarifying property rights relationships; Phoenix Media has transformed into a modern management enterprise," said Zhou Bin when discussing the gains and losses of the enterprise's listing.
Indeed, the operational and capital operation situation of Yilin Publishing House, a series publisher under Phoenix Media, confirmed what General Manager Zhou Bin said.
Yilin Publishing House's editor-in-chief Gu Aibin told this reporter that Yilin started with over a dozen employees and 40,000 yuan in startup capital. After several years of operation and capital operations, its comprehensive scale has ranked among the top in the national publishing industry, with the total code ocean of published books reaching 310 million yuan in 2010.
"We are planning to establish the Yilin Publishing Group." Talking about the future, Gu Aibin is not only confident but has already begun to implement plans. Yilin Publishing House has formed three majority-owned subsidiaries with various private capitals domestically, with more subsidiaries under planning.
The transformation of concepts is Gu Aibin's greatest change in recent years. "After corporate reform, the editor-in-chief is equivalent to the plant manager. One cannot merely focus on producing books but must also pay attention to consumers and the market, selling books well; continuously finding new growth points."
Wang, the general manager responsible for vocational education textbook publishing under Phoenix Media, told this reporter: "We aim to grow rapidly through a series of mergers and acquisitions into a leading enterprise in the vocational education industry."
Cultural system reform policies have stirred up waves in the cultural industry.
Chairman of Phoenix Media and Group Chairman Chen Haiyan told this newspaper that in the future, the degree of marketization in the cultural industry will continue to increase, and the process of institutional reform will accelerate.
"Some publishing and media enterprises have only completed legal corporate reforms, canceling public institutions and registering with the industry and commerce bureau, but in reality, they are not true enterprises. Their mechanisms have not changed, and modern enterprise systems and corporate governance structures have not been established," said Chen Haiyan. "After the spirit of the Sixth Plenary Session is implemented, this process will accelerate. For example, we are currently considering deepening institutional and mechanism reforms, even contemplating stock ownership reform at the level of the holding company."
Being skilled in capital operations and using financial tools is another highlight of the Phoenix Publishing Group. Chen Haiyan stated that having small capital is sufficient for publishing, but for the publishing industry, large capital is needed, and it is necessary to combine industrial capital with financial capital, which is a concept our group emphasizes consistently.
In recent years, the Phoenix Publishing Media Group has always paid attention to using various financial tools, using the main business as a fulcrum and financial tools as levers to drive faster development. During the financial crisis, it issued 2 billion yuan in medium-term notes; on December 1st this year, 1 billion yuan in medium-term financing notes arrived.
"Our goal for the next decade is to become the leader in the publishing industry and a new type of industry aircraft carrier. As a listed company, we have the responsibility and ability to grow stronger and larger. Facing the challenges of digital publishing and consumption upgrades in the future, we need to adapt to these changes. In terms of profit, we expect 740 million yuan this year, over 900 million yuan next year, and 1.077 billion yuan the year after, maintaining a 20% annual growth rate for the next three years," said Zhou Bin confidently.
"Corporate reform and listing have activated Phoenix Media, and we will fly like a phoenix," said Chairman Chen Haiyan.
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