Debt-laden State-owned electronics giant SVA Group Co has sold its entire stake in two listed units to the Shanghai government owned assets operation firm Shanghai Yidian Holdings for 2.18 billion yuan to alleviate its cash flow problems.
SVA divested its 30.07 percent in SVA Electron Co to Yidian Group for 1.11 billion yuan, or 3.15 yuan per share.
The company also transferred its 42.24 percent stake in SVA Information Industry Co to Yidian for 1.07 billion yuan, or 3.59 yuan per share.
Following the transaction, Yidian Group has now become the controlling shareholder in the two firms.
Both SVA Electron and SVA Information confirmed the acquisition in separate statements to the Shanghai Stock Exchange yesterday, when their A shares resumed trading after suspension since April 6, 2008.
Both the shares soared to their daily caps of 10 percent after trading started. SVA Electron shares closed at 4.19 yuan while SVA Information ended at 4.53 yuan.
"SVA Group's investment in the LCD panel business has seen cash strains with heavy debts arising due to substantial losses from poor management and faster-than-expected market changes," SVA Electron said in the statement, noting that the transaction would help the firm lift its profitability through resource integration with Yidian. SVA Information also made similar announcements.
The two listed companies posted huge losses in 2008. SVA Electron posted losses of 855 million yuan compared to a net profit of 266 million yuan in 2007. Its liability ratio reached 42.38 percent in 2008 from 2006's 27.32 percent.
SVA Information's net profit tumbled from 157.6 million yuan in 2007 to a loss of 991 million yuan in 2008.
Earlier media reports had said SVA Group was likely to incur losses of around 1.8 billion yuan for 2008, and was unable to raise loans from banks.
"The 2.18 billion cash from Yidian is crucial for the capital-starved SVA Group to revive its core assets, although the three listed companies under Yidian Group have not exactly performed well," said Deng Yongkang, analyst, Shanghai Securities.
In addition, the two acquired firms would also have to restructure by spinning off their worst performing assets like the fifth-generation LCD production line controlled by SVA Optronics Co Ltd, in which both firms hold identical stakes of 18.8 percent.
(China Daily June 9, 2009)