Purchase of Sing Tao stake marks strategy departure
China Enterprise Development Fund's (CEDF) $115 million purchase of a 23 per cent stake in Sing Tao Holdings is one of its biggest deals which pushes the group in a new direction.
For Sing Tao chairman Sally Aw Sian, it heralds the end of a long search for a new strategic investor for the publishing group she has run for more than 40 years which last year slipped into the red.
On first appearances, the deal seems at odds with CEDF's stated principal activity which is to invest in unlisted enterprises in the mainland, or quoted China-concept shares.
In relation to the size of the fund, the Sing Tao purchase is huge, accounting for about 36 per cent of its US$40.4 million in net assets.
If the group decides to pay in cash, it will all but eliminate its cash reserves, leaving the fund 95 per cent invested.
The closed-end fund was listed on the Irish Stock Exchange in 1996. It has given no clues that such a deal could be in the offing.
Yet the fact the group had decided to take such a large stake, plus an option to buy a further 10 per cent, is being seen as a change in direction for the fund.
From the outside, the Sing Tao acquisition appears to sit awkwardly with the rest of the fund's portfolio.
This includes three sets of US$8 million investments in motorcycle manufacturer Qingdao Qingqi Motor, drugs firm Shanxi Guardian Pharmaceuticals, and beer-maker New China Hong Kong Brewery.
With the fund recording only a 2 per cent rise in net attributable income in the first six months of the year, some believe a change in direction may be welcome.
So what is the fund getting for its money? Sing Tao Holdings spans a group of mature businesses focused on publishing, printing and property development.
Last year, it made a $115.9 million loss, though core businesses remained profitable.
As well as its flagship newspaper operations of the Sing Tao Daily and the Hong Kong Standard, Sing Tao Holdings also owns three commercial printing companies and has a number of property developments in Hong Kong, Canada, New Zealand and the mainland.