TCL Corp unit prepares to go private before listing of group
Move necessary as rules limit firms to just one company on mainland bourse
Leading mainland consumer electronics maker TCL Corp plans to privatise its Shenzhen-listed subsidiary in preparation for a flotation of the entire group.
The privatisation is necessary for TCL Corp to comply with domestic stock market rules, which limit a company's mainland-listed units to one.
TCL Corp president Tomson Li Dongsheng said the merger with Shenzhen-listed A share TCL Communication Equipment would enable the group to fully tap the capital market for its diversified consumer electronic manufacturing business.
'The merger will help the group achieve economies of scale and synergy [with its subsidiary], enhancing its international competitive strength,' Mr Li said.
The group's products include television sets, mobile phones, washing machines, refrigerators, air-conditioners, personal computers, audio-visual equipment and components.
Mr Li said the move would also avoid cumbersome connected transactions between TCL Corp and its listed subsidiary.
In April, the China Securities Regulatory Commission (CSRC) issued a notice to TCL Communication , requiring it to remedy accounting problems for the 2000 financial year.
The notice said TCL Communication , a sister company of Hong Kong-listed TCL International Holdings, 'made a major accounting error by inflating its gain' in 2000.
The company should have reported a loss of 83.56 million yuan (HK$78.32 million) instead of a net profit of 26.32 million yuan.
In China, listed companies are often plagued by false financial statements which accompany frequent and large connected transactions with their unlisted parent companies, putting the interests of minority shareholders at risk.
The privatisation of TCL Communication , which makes telephones and holds 36 per cent of mobile-phone manufacturer TCL Mobile, has been approved by the CSRC.
Stockholders will be able to exchange their shares for the yuan-denominated common shares of TCL Corp, which will probably list on Shanghai's A-share market.
TCL Corp has been preparing for the domestic listing for more than 1? years. Last year, it restructured itself into a shareholding company.
In the process, foreign investors such as Hong Kong-invested Nam Tai Electronics, battery maker Gold Peak Industries (Holdings), Philips Electronics China, consumer electronics giant Toshiba and trading conglomerate Sumitomo became strategic shareholders, holding a combined 18.38 per cent stake.
In the first half, TCL Corp had 14.79 billion yuan in assets against liabilities of 10.19 billion yuan. Net profit was 280.17 million yuan on a turnover of 12.7 billion yuan.
Last year, net profit grew 45.5 per cent to 424.64 million yuan while turnover rose 73.2 per cent to 22.11 billion yuan.
