A loss-making cigarette packaging company, facing imminent delisting, has announced a bold 1.006 billion yuan cash acquisition of a pharmaceutical firm. This move is coupled with the company's controlling shareholder simultaneously transferring a 10% stake to the target company's shareholders.

While the cash flows for the acquisition and the stake transfer are kept separate, the structure effectively creates a closed-loop, share-swap-like arrangement between the listed company, the controlling shareholder, and the target company's shareholders. This is the "self-rescue" plan unveiled on July 27th by Anhui Genuine Newmaterials Co.,Ltd. (stock code: 603429).

The company plans to acquire a 50.76% stake in Jiangsu Huiju Pharmaceutical Co., Ltd. for 1.006 billion yuan in cash. This constitutes a major asset restructuring and related-party transaction. The central question is whether this deal is primarily a "delisting rescue" or a genuine business transformation.

The "Share Swap" Closed Loop and the Three-Way Tie

Huiju Pharmaceutical is a national "Little Giant" specialized in complex small molecule chemical drugs, key intermediates, and active pharmaceutical ingredients (APIs). It provides CDMO services and has long-term partnerships with international pharmaceutical companies like Merck and Elanco Animal Health. In 2025, its revenue was 585 million yuan, and in the first half of 2026, it reported 307 million yuan in revenue and 46.7 million yuan in net profit.

The most intriguing aspect of the plan is not the acquisition itself, but the accompanying "share swap" closed-loop design. Simultaneously, the controlling shareholder, Xu Shanshui, signed separate share transfer agreements with Huiju's shareholders, Huang Hua and Bi Weiguo. Xu Shanshui transferred a total of 10.1051% of his shares in the listed company at 9.72 yuan per share – a premium over the closing price of 7.42 yuan – for a total consideration of 515 million yuan. The agreement explicitly states that the funds Huang and Bi use to purchase these shares cannot come from the listed company's acquisition payment.

This structure is viewed as a "life-or-death restructuring." It ensures the listed company gains control of Huiju, the controlling shareholder reduces his stake while the transaction counterparties receive shares with a three-year lock-up period. This effectively ties all three parties together, creating a powerful incentive for everyone to make the deal succeed.

The Cigarette Packaging Company's Revenue Has Shrunk by 80% in Three Years

Anhui Genuine Newmaterials, formerly a producer of cigarette packaging materials, has seen its core business shrink dramatically. In 2022, its revenue was 828 million yuan with a net profit of 117 million yuan. By 2024, revenue had fallen to 458 million yuan, and by 2025, it plummeted to just 171 million yuan, with a net loss of 18.2 million yuan. Over three years, its revenue contracted by nearly 80%. The company was placed under a delisting risk warning on March 24, 2026, as it had negative net profit and revenue below 300 million yuan in 2025. The first half of 2026 saw a net loss of 17.9 million yuan, putting the delisting threat squarely in focus.

From a delisting rescue perspective, if the acquisition had been completed in 2025, the company's revenue would have surged to 757 million yuan, and net profit would have turned positive. This suggests that if the deal is finalized before the 2026 annual report, it could help the company clear the 300 million yuan revenue hurdle and return to profitability, significantly boosting its chances of survival.

From a transformation perspective, Huiju's CDMO business is a high-value-added sector within the pharmaceutical industry, with much higher margins than packaging. Huiju serves over 300 pharmaceutical companies globally and has started building a 1.2 billion yuan advanced API and formulation production platform. This indicates a genuine intention to pivot into a more promising industry. However, the company has not addressed how it will integrate a 20-year-old specialty pharmaceutical firm into a printing company, leaving questions about management, culture, and client integration unanswered.

Billionaire Xu Shanshui: From Tobacco Legend to Three-Time Detention

Xu Shanshui, born in 1969 in Anhui province, started his business with a small focus on cigarette tipping paper. He led the company to a successful IPO in 2017 and was repeatedly listed on the Hurun Rich List, with a peak wealth of 6.5 billion yuan in 2020. However, his fortunes turned in January 2023, when he was detained for suspected bribery. He was released shortly after but was detained again four months later, and then a third time. These detentions, spanning from 2023 to 2024, were linked to the anti-corruption campaign in the tobacco industry, given that the company's core clients are provincial-level tobacco companies. The company has not commented on any direct connection.

Key Risks of the Transaction

The first major risk is a cash shortfall. As of the end of the first quarter of 2026, the company had only 827 million yuan in cash on hand, which is insufficient to cover the 1.006 billion yuan acquisition price. The company plans to use "self-owned funds or self-raised funds," but a loss-making, ST-flagged company may struggle to secure bank loans.

The second risk is goodwill impairment. Using an income approach, Huiju's equity is valued at 1.982 billion yuan, a 126.63% premium over its net asset value of 875 million yuan. This would result in the addition of nearly 500 million yuan in goodwill on the company's balance sheet. While Huiju's shareholders have promised net profits of at least 134 million yuan, 168 million yuan, and 221 million yuan for 2026, 2027, and 2028 respectively, failure to meet these targets could lead to a goodwill impairment charge that directly impacts the listed company's profits.

The third risk is the uncertainty surrounding Xu Shanshui. He still faces legal issues, including the detention for bribery. Furthermore, 60% of his shares (129 million out of 215 million) are under judicial freeze due to a dispute with a property developer.

Finally, the current plan is only a draft. It still requires shareholder approval, regulatory review, and other approvals. Any one of these steps could derail the deal. Investors should closely monitor the audit report, the signing of the formal agreement, the source of funding, and the company's financial performance in 2026.

It is also important to note that Huiju's overseas sales account for over 55% of its revenue, making it vulnerable to international trade policies and exchange rate fluctuations. The stock price of Anhui Genuine Newmaterials Co.,Ltd. (stock code: 603429) closed at 7.42 yuan on July 28, with a market cap of only 3.892 billion yuan, and a daily price limit of 5%, which limits liquidity.

Xu Shanshui's personal cash-out of 515 million yuan is separate from the company's 1.006 billion yuan acquisition. However, the company's money belongs to all shareholders. The core motivation for him is likely that without this "gamble," the company would most likely be delisted, and his stake would be worthless. This "life-or-death rescue" is a real attempt to both stave off delisting and pivot into a more promising sector. The path from the draft plan to successful execution is fraught with uncertainty regarding cash, goodwill, integration, and the controlling shareholder's past. Until these uncertainties are resolved, investors should be cautious and avoid chasing the stock.