Singapore 23/09/2016 - Hong Kong-listed Chinese aluminium extrude Xingfa Aluminium announced on Friday that its largest shareholder Guangxin Aluminium – owned by China’s Guangdong provincial government – and a few top shareholders have proposed privatising the firm.
The announcement comes after a one-week share trading halt by the company which had industry watchers speculating that it could be merged or taken over by Chinalco.
Guangxin and five individual shareholders of Xingfa – four being directors of the company have proposed acquiring the company’s 418 million shares in issue at HK$3.70 per share – this amounts to a total consideration of HK$424.57 million ($55 million), Xinfa announced late on Thursday. Trading of its shares was resumed on Friday.
The joint offers together hold 72.6 percent stake in Xingfa currently. After the acquisition, Guangxin is expected to hold 41.3 percent stake in Xingfa, up from its current 30 percent interest.
The company plans to implement a series of long-term growth strategies, which may affect short-term growth profile and may result in divergence between the Joint offerors’ views on the company’s potential long-term value and investors’ views on the company’s share price, Xingfa said in the rationale for the acquisition.
Since its listing in March 2008, the company’s share price performance has not been satisfactory, with its shares liquidity at low level over a long period of time, Xingfa added.
The joint offerors consider that the depressed share price has had an adverse impact on the company’s reputation with customers, and therefore on its business, and also on employee morale - the implementation of the proposal could eliminate this adverse impact, it said.
The privatisation of Xingfa sets the path for mergers with other state-owned enterprises (SOEs) in the future, a Shanghai-based trader commented.
Talk in the market was that Xingfa could be taken over by Chinalco as part of Beijing’s reform of its SOEs as the shares of Chinalco’s Hong Kong-listed subsidiary, Chinalco Mining Corp International (CMCI), was halted on the same day as Xingfa. The trading of CMCI’s shares remain suspended on Friday.
Xingfa, which is based in Foshan in southern Guangdong province, sold around 290,000 tonnes of construction and industrial aluminium profiles last year.