Xinxing Ductile Iron Pipes Shareholders Reject RMB 269 Million Private Placement to Controlling Shareholder

Xinxing Ductile Iron Pipes (000778. SZ) disclosed on the evening of September 10, 2026 the voting results of its third extraordinary shareholders meeting of 2026 held that day, showing that its previously proposed share issuance to a specific target was not approved. The subscriber was controlling shareholder Xinxing Cathay International Group. Because the transaction constituted a related-party transaction, Xinxing Cathay International Group's 1.638 billion shares abstained from voting. After that abstention, among non-related shareholders participating in the vote, the proportion of opposing votes was generally close to or above 60%, and resolutions covering the issuance conditions, issuance price, use of proceeds and the exemption from making a tender offer all failed to pass.

Taking the resolution on whether the company met the conditions for issuing shares to a specific target as an example, after Xinxing Cathay International Group abstained, valid voting rights participating in the vote totaled about 240 million shares, of which 90.145 million shares, or 37.58%, voted in favor; about 147 million shares, or 61.08%, voted against; and 3.2224 million shares, or 1.34%, abstained. The roughly 147 million opposing shares were exactly the same as the opposing votes in the minority shareholder count and all came from the minority shareholder statistical scope. In subsequent resolutions on the issuance method, subscriber, issuance price, issuance volume, use of proceeds and lock-up period, opposing votes broadly ranged from about 138 million to 145 million shares, supporting votes were about 90 million to 95 million shares, and abstentions ranged from 3.22 million to 8.98 million shares.

Because these resolutions were special resolutions requiring approval from more than two-thirds of the valid voting rights held by non-related shareholders attending the meeting, the actual approval ratio was only about 38%. The related private placement plan, the share subscription agreement, the exemption from making a tender offer and the authorization for the board to handle the private placement all failed to pass.

The resolution on adjusting the company's 2026 investment plan was ultimately approved, but minority shareholders also cast a relatively large number of opposing votes. The resolution received 110 million affirmative votes, 121 million opposing votes and 8.9327 million abstentions from minority shareholders, with the minority opposition ratio reaching 50.34% and opposing votes exceeding affirmative votes. Xinxing Ductile Iron Pipes' information disclosure department said that follow-up arrangements after the rejection of the private placement would depend on the company's next steps.

According to the plan disclosed in August 2026, Xinxing Ductile Iron Pipes intended to issue no more than 198 million shares to Xinxing Cathay International Group, with the issuance volume not exceeding 5% of total share capital before the issuance and proceeds of no more than RMB 269 million. The issuance price was to be no less than 90% of the average trading price of the company's shares over the 20 trading days preceding the pricing benchmark date. Xinxing Cathay International Group planned to subscribe in cash using its own funds or self-raised funds, and the shares acquired would not be transferable within 36 months from the completion of the issuance. Before the private placement, Xinxing Cathay International Group held 1.638 billion shares of Xinxing Ductile Iron Pipes, a stake of 41.34%; based on the maximum issuance size, its shareholding ratio would rise to 44.13% after completion.

Under the plan, the RMB 269 million in proceeds, after deducting issuance expenses, would be used entirely to repay special debt owed by Xinxing Ductile Iron Pipes to Xinxing Cathay International Group formed from allocated state funds. Xinxing Ductile Iron Pipes stated in the plan that Xinxing Cathay International Group had previously provided funds of a state capital nature to the listed company and its subsidiaries by way of special loans; under relevant state capital operation budget management rules, such funds should be converted into equity investment when conditions are met. The private placement was therefore intended to convert allocated state funds existing as special debt into direct equity investment by Xinxing Cathay International Group in Xinxing Ductile Iron Pipes, while reducing continuing related-party transactions between the two parties.

Xinxing Cathay International Group is 100% owned by the State-owned Assets Supervision and Administration Commission of the State Council, and its businesses cover metallurgical casting, light industry and apparel, machinery and equipment and emergency response, and pharmaceuticals. As of the end of March 2026, Xinxing Cathay International Group had total assets of about RMB 106.043 billion and an asset-liability ratio of 70.33%; in the first quarter of 2026 it recorded total operating revenue of RMB 14.308 billion and a net loss attributable to the parent of RMB 124 million. Under the share subscription agreement, approval by the shareholders meeting of the private placement and consent for Xinxing Cathay International Group to be exempted from making a tender offer were necessary conditions for the agreement to take effect. The voting result means the existing plan failed to clear the shareholders meeting threshold, and whether the company will revise the issuance size, pricing arrangements or use of proceeds, as well as how the related special debt will be handled, still awaits further arrangements.