Singapore 18/05/2016 - China Hongqiao Group has entered into a Memorandum of Understanding (MoU) to acquire a 28.18-percent stake in Shenzhen-listed Chinese aluminium plate, strip and foil Loften Environmental Technology Co, the Hong Kong-listed Hongqiao announced on Monday after market close.
Under the MoU, Hongqiao intends to acquire the stake from Loften’s chairman and largest shareholder Yu Rongqiang at a consideration based on 90 percent of Loften’s closing price on the last trading day before the execution of a definitive agreement. The purchase consideration will not be more than 900 million yuan ($137 million).
Loften’s shares on the Shenzhen bourse remains in a trading halt since Monday. It had closed at 3.83 yuan per share on May 13.
The transaction is subject to Hongqiao’s due diligence on the company and regulatory approvals.
The acquisition will “play a very important role in enhancing the group’s position in the area of aluminium deep processing through industrial integration and also bring positive impact to the group’s production and operation,” said Hongqiao.
Located in Fuxing county in Shandong province, Loften made net losses of 264 million yuan in 2015 and 411 million yuan in 2014.
The company moved into high precision aluminium plate and strip production last year. Its processed aluminium products totalled 166,874 tonnes last year, down 44 percent on the divestment of six subsidiaries and below-capacity production owing to a weak market.
Hongqiao’s shares resumed trading on Wednesday after a trading halt on Tuesday afternoon, Hong Kong time. Its share price rose 0.71 percent to HK$5.67 ($0.73) per share so far on Wednesday.
Hongqiao had lifted its aluminium production capacity by 28.8 percent to 5.186 million tonnes per year at end-2015. The expansions increased its aluminium output by 40 percent to 4.421 million tonnes in 2015.
It has plans to take its aluminium production capacity to six million tonnes per year by end-2016.