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Thomson to Buy Stake in Konka

Konka Group, one of China's leading TV makers, said Wednesday its largest shareholder, Overseas Chinese Town Group, has won regulatory approval to sell a 4.82 percent stake in the company to an arm of France's Thomson SA.

The State-owned Assets Supervision and Administration Commission gave permission for Thomson Investments Group Ltd to buy 29 million non-tradable Konka shares from Overseas Chinese Town Group, the Chinese TV maker said in a statement filed with the Shenzhen stock exchange.

Thomson Investments Group Ltd is a wholly owned unit of the French company registered in the British Virgin Islands.

According to the share transfer deal signed between the two sides, Thomson will pay 156.6 million yuan (US$18.9 million) for the deal, raising its total interest in Konka to 7.98 percent.

Last November, the French company bought 19 million of Konka's tradable B shares, or a 3.16 percent stake, from Overseas Chinese Town Group for HK$68.4 million (US$8.8 million). After the two deals, Thomson will become the fourth largest shareholder in the Chinese TV maker.

And Overseas Chinese Town Group, a large State-owned enterprise involved in tourism, real estate and household appliances, will remain the largest shareholder, with a 23.3 percent stake in Konka.

"The deal will be mutually beneficial," said Chen Yuanwang, industry analyst from China Securities.

With their advantages in brand popularity and technology, the two companies will have potential for further development in the TV market.

Chen said China's TV manufacturing industry, though suffering over the past two years, will improve next year.

The market will have better development prospects, driven by the growing demand for high-end TV products, he said.

"The transaction will strengthen the position of Thomson's displays business in the growing Chinese market," the French company said in a statement when the deal was signed in November, 2004.

Thomson has been active in China recently, most notably through a production deal with TCL Corp, another major Chinese consumer electronics group.

Last year, TCL merged its television business with Thomson's, creating the world's largest television manufacturer TTE. Thomson holds a 33 percent stake in the joint venture and TCL owns the majority 67 percent.

As Thomson's largest partner in the TV manufacturing sector, TCL said that the relationship between the two will not be changed by the Konka deal.

"The deal will not affect our cooperation with the French company," said Li Dongsheng, board chairman and president of TCL Group, in an earlier interview with China Daily.

Thomson informed TCL of its investment decision before the deal was signed, Li said.

Previous reports said Konka launched talks with foreign partners more than a year ago in an effort to expand its business amid cut-throat competition from rivals and tough anti-dumping measures imposed on it by the United States.

The Chinese TV maker posted a 3.42 percent year-on-year rise in net profits, or 56.85 million yuan (US$6.9 million), in the first nine months of last year.

(China Daily February 3, 2005)

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