Chinese AI company AInnovation Technology Group acquired a 51% equity interest in industrial software company Qingdao AInnovation ALP Intelligent Industrial Technology Co., Ltd. for a total consideration of RMB122.4 million ($17.1 million), according to a Hong Kong Stock Exchange filing seen by CrowdFund Insider.
AInnovation entered into a share transfer agreement with three vendors in May 2022 to conditionally purchase the stake in Qingdao ALP.
The remaining equity transfer payment, other than the first share transfer payment, was to be paid over three years, with payments linked to the fulfilment of performance commitment indicators.
Qingdao ALP has been engaged in the industrial software field for more than 10 years. AInnovation said the company’s accumulated industry know-how, mature customer base and industrial scenario data have supported the implementation of the group’s “AI + Manufacturing” strategy.
The acquisition also brought industrial-focused revenue, AI and software service revenue and profit contribution to AInnovation, while helping the group establish benchmark customers and a revenue base in high-growth verticals including food and beverage and new materials.
Under the acquisition agreement, the performance assessment for Qingdao ALP covered revenue, net profit excluding extraordinary gains and losses, sales gross margin and financial gross margin.
The amount of the remaining share transfer consideration payable to the vendors depended on the target company’s performance.
Qingdao ALP did not fully meet its performance commitments for 2022, 2023 and 2024. Its performance achievement rate for 2022 was 95.67%, which was below the 100% commitment but reached the standard for AInnovation to pay the share transfer consideration for the year.
The company is obligated to pay the vendors RMB19.52 million as the adjusted share transfer price for 2022.
AInnovation subsequently adjusted the assessment of the sales gross margin indicator. The adjustment took effect from May 2023 and applied to the performance assessments for 2023 and 2024.
After the adjustment and taking into account payment collection, Qingdao ALP’s performance achievement rates for 2023 and 2024 were calculated at 91.04% and 96.67%, respectively. AInnovation is required to pay the vendors RMB18.57 million for 2023 and RMB19.72 million for 2024.
AInnovation said Qingdao ALP recorded revenue in 2022, 2023 and 2024 that was significantly higher than the adjusted share transfer price. Its net profit also increased continuously over the three-year period, according to the filing.
The company said Qingdao ALP’s industrial software business has been an important part of its AI + Manufacturing strategy, supporting technology implementation, customer expansion and expansion into industrial verticals.