Acquiring assets related to major shareholders, Tianyu Co., Ltd. will face three major risk points

Interface News reporter | Chen Huidong

On the evening of March 30, Tianyu Co., Ltd. (300702.SZ) announced that it plans to use cash to purchase 87.8173% of the equity in Shanghai Xingke High-Purity Solvent Co., Ltd. (hereinafter “Shanghai Xingke”), an entity controlled by its controlling shareholder and one of its actual controllers, as well as the company’s chairman and general manager, Tu Yongjun, with a consideration of 334 million yuan. The target asset’s premium-to-assessment value rate is 75.94%.

On the surface, this deal appears to be an industrial integration aimed at optimizing the industrial chain layout and reducing related-party transactions. But after a deeper look at the deal structure, the details of the consideration, and both parties’ operating performance and financial results, is this acquisition truly a strategic move for the listed company to “strengthen and supplement its chain,” or is it a show put on by a self-dealing controlling party—one that leaves the listed company and public investors to foot the bill?

Tianyu Co., Ltd. is mainly engaged in the R&D, production, and sales of pharmaceutical intermediates, active pharmaceutical ingredients (APIs), and formulations. Its predecessor was the Huangyan Chemical Factory founded by Tu Yongjun in 1993. The company’s product range mainly covers multiple drug areas such as antihypertensives, anti-asthma, antihyperglycemics (lowering blood sugar), lipid-lowering drugs (lowering blood lipids), and anticoagulation (anti-blood clotting) medicines.

After going public in 2017, Tianyu Co., Ltd. reached its performance peak in 2020. At that time, the antihypertensive drug incident involving Huahai Pharmaceutical led to a global shortage of global sartan API supply and a surge in prices, and Tianyu Co., Ltd. earned excess profits that year.

In the past two years, Tianyu Co., Ltd.’s performance has not been ideal. From 2023 to 2024, the balance of net profit attributable to shareholders was both less than 667M yuan, far from the 6.67 billion yuan peak in 2020. The Q3 2025 report shows that the company’s operating revenue increased year over year by 18.36% to 2.29B yuan, and its net profit attributable to shareholders increased year over year by 159.57% to 221 million yuan.

Tianyu Co., Ltd.’s performance. Source: Wind

The target of this transaction, Shanghai Xingke, is a national-level “specialized, innovative, and excellence-focused” little giant enterprise. It forms an upstream-downstream relationship with Tianyu Co., Ltd.’s pharmaceutical intermediate and API production businesses.

According to Tianyancha, Shanghai Xingke was established in 2011 and is a member enterprise of Tianyu Co., Ltd., with Tu Yongjun holding 39.4905% of Shanghai Xingke’s shares. Tu Yongjun, Lin Jie, and Tu Wanru serve as directors at the company. Tianyu Co., Ltd.’s announcement shows that Tu Wanru is Tu Yongjun and Lin Jie’s daughter.

In 2018, Tu Yongjun invested 55.4052 million yuan to hold 39.4905% of Shanghai Xingke, and at that time the target’s valuation was approximately 140 million yuan. With this 334 million yuan consideration, Tu Yongjun and other shareholders directly “made a windfall” of more than 200 million yuan.

The valuation report shows that there are capital and business dealings between Shanghai Xingke and multiple of Tianyu Co., Ltd.’s subsidiaries. In January 2026, Shanghai Xingke sold to Tianyu Co., Ltd. and related entities controlled by it for 840.6k yuan. On the purchase side, in January 2026, Shanghai Xingke purchased 21.0767 million yuan from a related party, Changyi Tianyu Pharmaceutical Co., Ltd., and related-party transactions occupy an important position in the target company’s revenue and procurement.

Tianyu Co., Ltd.’s related-party transaction announcement disclosed at the beginning of the year shows that for 2026, the company and its subsidiaries plan to purchase raw materials and sell products to Shanghai Xingke and its subsidiaries, with the total amount of related-party transactions expected not to exceed 160 million yuan.

This dual linkage of “upstream-downstream plus equity ties” has raised serious doubts about the fairness of the transaction price.

With this large-scale acquisition, Tianyu Co., Ltd. will also face three major risks afterward.

First, funding risk. According to the announcement, the entire consideration of 334 million yuan for this transaction will be paid in cash, with the funding source being the company’s own funds combined with bank acquisition loans. This is a severe test of Tianyu Co., Ltd.’s own financial position.

The Q3 2025 report of Tianyu Co., Ltd. shows that the company’s balance of monetary funds is 388 million yuan. In addition, over the past two years, the company’s asset-liability ratio has risen notably, from 36.05% in 2021 to 43.32% in the Q3 2025 report, placing it in a relatively high range among peers. At the same time, short-term borrowings increased from 423 million yuan in 2021 to 840.6k yuan, a relatively large increase.

Second, behind the high premium, the target’s profitability has volatility. The audit report shows that in 2025, Shanghai Xingke achieved operating revenue of 454 million yuan and net profit of 26.17 million yuan, which was acceptable. However, in January 2026, the valuation benchmark date, there was a loss in a single month: it recorded operating revenue of 43.98 million yuan and a net profit loss of 1.1991 million yuan.

Third, the target company also has a considerable amount of liabilities and a risk of recovering accounts receivable.

There are doubts about the target’s “large amounts on both deposits and loans.” The audit report shows that as of January 31, Shanghai Xingke’s consolidated statement liabilities totaled 200 million yuan, while the balance of monetary funds on its books was 35.1341 million yuan, and meanwhile its short-term borrowings reached 106 million yuan.

Regarding accounts receivable, the valuation report shows that the target has identified five customers, such as Inner Mongolia Pucong Pharmaceutical Co., Ltd., for which there is a low likelihood of recovery of receivables due to those customers’ operating difficulties; the report expects a full loss of its accounts receivable from those customers. For another five customers, such as Suzhou Kunpeng Biotechnology Co., Ltd., which have already had legal measures taken against them, the report made an impairment provision of 80% on an individual basis.

Interface News also noted that this acquisition did not include a performance commitment provision. This means that deal counterparties such as Tu Yongjun do not bear the risk of not meeting performance targets; all operating risks are borne by the listed company after the injection.

Interface News called Tianyu Co., Ltd. about issues such as performance commitments and business synergies. The company responded exclusively, stating that after assessment, the listed company believes the target’s performance is relatively stable and currently has no plans to add performance commitment provisions. In terms of business synergy, Shanghai Xingke has market demand but insufficient own production capacity, and orders on hand are relatively full. The listed company can provide additional production capacity to meet its market demand; at the same time, this can also effectively improve the company’s own utilization of production capacity, achieving a win-win situation. “However, the difficulty of getting production capacity approvals in the Shanghai region is relatively high. We can provide additional production capacity to this enterprise. As for the specific revenue scale it can contribute and what level it can be raised to, we are currently unable to disclose.”

In an acquisition case where multiple factors overlap—big-shareholder-led, high premium, short-term profitability volatility, no performance commitments, and a huge cash payment—who is the ultimate beneficiary?

According to the transaction prospectus, the “benefit” from this deal most directly flows without doubt to Tu Yongjun, the controlling shareholder, who cashes out about 150 million yuan in advance.