A Salt Company Plans to Acquire a Battery Manufacturer: Unraveling the Logic Behind this Cross-Business Merger in the Snowy Salt Industry
Hello everyone, I'm your financial observer. Today, we're going to discuss a story that might sound a bit fantastical: Xuetian Salt Industry, a state-owned listed company that sells salt in Hunan, has suddenly announced its intention to spend a significant amount of money to acquire Kuntian New Energy, a lithium battery anode material company based in Hebei.
Many people outside the financial sector might wonder, "What does a salt company have to do with battery manufacturing? Can salt even be used to charge batteries?" Or, "Weren't they a unicorn company? Why would they decide to sell themselves?"
Don't worry; let's put aside the complex financial jargon and break down this situation in simple terms. Behind this move are three main forces at play: the desire of traditional industries to innovate, the cooling of the new energy sector, and the narrowing of capital exit options.
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Why a Salt Company Would Want to Acquire a Battery Manufacturer?
The simple reason is that the salt business is not generating enough profits, so they need to find new sources of revenue.
First, let's take a look at Xuetian Salt Industry's current situation. Xuetian Salt Industry is a long-established state-owned company whose main products include table salt, industrial salt, as well as chemical products like mirabilite and soda ash. Although salt is a basic necessity for every household, this business has a significant drawback: its growth potential is very limited.
The numbers tell the story clearly. In the first half of 2026, Xuetian Salt Industry's revenue was 2.658 billion yuan, which not only didn't increase but also decreased by 2.89% year-on-year. Its net profit of 79.18 million yuan also fell by 9.23%.
It's like an old restaurant that has been in business for decades. The food remains the same, but with so many new trendy restaurants opening nearby, old customers are drifting away, and new customers are reluctant to come. For a listed company, if its performance doesn't grow or even declines over time, its stock price will fall, and shareholders will become frustrated, putting significant pressure on the management.
Therefore, Xuetian Salt Industry needs to find a new growth strategy. The company has already made attempts in this direction, acquiring a battery anode material company, Meite New Material, in 2022 and 2025. Now, it wants to buy Kuntian New Energy, which specializes in negative electrode materials.
Why this move? Batteries are like sandwiches, with the positive and negative electrodes as the “bread” and the electrolyte in between. By acquiring Kuntian New Energy, Xuetian Salt Industry will not only continue to sell salt but also become a company with dual main businesses in the salt chemical and new energy materials sectors. In industry terms, this is about complementing each other's strengths. In simpler terms, Xuetian Salt Industry wants to expand its offerings beyond salt and include the core components of batteries, making its business more attractive to investors and providing room for growth in its stock price.
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Who Is Kuntian New Energy?
Kuntian New Energy is no small company. It was once the “number one energy unicorn” in Hebei. From 2022 to 2023, it was a favorite of the capital market. Founded in 2018, the company started by providing graphite processing services for battery anode materials, a highly energy-consuming and labor-intensive process. Over time, it developed its own production capabilities for anode materials. Its products include artificial graphite and silicon-based anodes, and its customer list includes industry giants like CATL, Honeycomb Energy, EVE Energy, and Sunwoda.
What's more impressive is its financing history. In just over a year from 2022 to 2023, Kuntian New Energy raised more than 3 billion yuan through four rounds of financing, with investors including Sinopec Capital, SK Telecom, Sany Group, and Fosun Creative Capital. The pre-IPO financing in January 2023 valued the company at over 10 billion yuan, making it the first energy unicorn in Hebei Province during the peak of the capital boom.
The logic behind this was simple: with the explosive growth of new energy vehicles, the demand for batteries was enormous, and companies with production capacity were in high demand. Kuntian New Energy built three production bases in Hebei, Sichuan, and Yunnan, with a total capacity of over 210,000 tons, placing it among the top players in the industry.
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Why Would a Unicorn Company Choose to Sell?
However, the situation has changed for Kuntian New Energy. The new energy industry is facing challenges, and profits have declined. If Kuntian New Energy had continued to make money, it would have considered going public (IPO) for a higher valuation and greater returns for its owners and investors. But why did it choose to sell to Xuetian Salt Industry?
The main reason is increased revenue without increased profits. The lithium battery industry has undergone a dramatic shift. In previous years, companies expanded their production capacity recklessly, leading to an oversupply. This situation is similar to a market where too many西瓜 are available, driving down prices.
Here are Kuntian New Energy's financial figures:
- 2024: Revenue of 1.29 billion yuan, with a loss of 66.17 million yuan.
- 2025: Revenue of 1.997 billion yuan (an increase), but a loss of 32.58 million yuan.
- First half of 2026: Revenue of 1.412 billion yuan, with a net profit of 120 million yuan, finally turning a loss into a profit.
Although Kuntian New Energy made a profit in the first half of 2026, it was just barely breaking even. Moreover, the company is still expanding, with the second phase of its Yunnan project in operation, aiming for a capacity of 500,000 tons.
This has created a vicious cycle:
1. Industry price wars: The more you sell, the lower the price per unit, resulting in thin profits.
2. Expansion requires money: Building factories, purchasing equipment, and conducting research and development all require continuous cash investment.
3. Insufficient cash flow: The money earned from sales is not enough to cover the costs of expansion.
At this point, Kuntian New Energy urgently needs a large amount of capital to sustain its operations and continue to expand.
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Why Didn’t Kuntian New Energy Choose to Go Public?
You might think that a company of Kuntian New Energy's size would have an ideal exit strategy through an IPO on the A-share market. However, the situation is different:
- A-share market scrutiny has tightened for new energy companies. In December 2023, Kuntian New Energy filed for listing guidance with the Hebei Securities Regulatory Bureau, aiming for the Shenzhen Main Board. However, more than two years have passed, and there's still no news about an IPO approval.
- Changing policy priorities: Regulators are now focusing more on a company's sustainable profitability, industry concentration, and whether it plays a core role in “hard technology.” For traditional lithium battery material companies with excess capacity and low profits, the listing requirements are very high.
- High time costs: Waiting for an IPO could take three to five years, during which the company would continue to lose money or only make minimal profits, and shareholders would not want to wait.
- Valuation risks: If Kuntian New Energy went public forcefully, its valuation might be low, possibly even below its initial investment. Selling to a listed company would allow it to get a better price for its assets.
Therefore, selling to Xuetian Salt Industry became the most practical option for Kuntian New Energy and its 54 shareholders, including Betray, EVE Energy, and Sinopec Capital. Although it's not as glamorous as going public independently, this move allows for a quick return of capital, resolves the company's financial issues, and provides early investors with an exit strategy.
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Is the Deal Secure?
The deal is still in the “pre-plan” stage and is not yet finalized, with several uncertainties:
1. Valuation negotiations: How much will Xuetian Salt Industry pay, and how much is Kuntian New Energy worth?
2. Long approval process: The approval process involves multiple parties, including the State-owned Assets Supervision and Administration Commission (since Xuetian Salt Industry is a state-owned company), the shareholders' meeting, the Shanghai Stock Exchange, and the China Securities Regulatory Commission, which could be lengthy.
3. An awkward development: On the day after the pre-plan was disclosed, Xuetian Salt Industry issued a correction stating that Liu Gejun, the company's second-largest shareholder, was under investigation by the CSRC for suspected insider trading. Although Liu Gejun claimed that no conclusion has been reached and no penalties were imposed, this could cast a shadow over the deal and potentially influence the regulatory approval process or lead the buyer to negotiate for a lower price.
What does this tell us?
1. Cross-business mergers are becoming common: Traditional industries (such as salt, coal, and steel) are acquiring new energy assets to transform themselves. This is not unique to Xuetian Salt Industry; it's a trend.
2. The new energy industry is in a period of consolidation: In the past, having production capacity meant profits; now, only companies that can generate stable profits can survive. Those that rely on financing to expand but cannot achieve steady profits are either acquired or eliminated.
3. Diversified capital exit options: As the IPO route becomes more difficult, acquisitions by listed companies have become an important exit strategy. In the future, we may see more such partnerships between traditional state-owned enterprises and new energy unicorns.
In summary: Xuetian Salt Industry's acquisition of Kuntian New Energy is not a random move but a strategic attempt to adapt to changing market conditions. For Kuntian New Energy, it's a practical choice to survive in a challenging industry environment. In the cold winter of the new energy sector, forming alliances and finding new sources of cash flow are crucial for survival.