Sichuan Expressway purchase on hold
Delay comes after Oriental Harvest claims it owns the project
H share Sichuan Expressway has been forced to put the brakes on a 777 million yuan toll-road acquisition and a related A-share listing because of a dispute over the ownership of the project.
Hong Kong's Oriental Harvest Infrastructure (China) claimed to own 60 per cent of the Sichuan Changle expressway, a senior Sichuan Expressway executive said yesterday.
That claim challenges Sichuan Expressway's disclosure last month that the toll road was 99.18 per cent owned by its parent Sichuan Highway Development. Sichuan Highway owns 39.3 per cent of Sichuan Expressway.
'We took [the Hong Kong] stock exchange's advice to put the acquisition on hold until the shareholding is sorted out,' the executive said. 'As a result, the A-share plan is suspended, too.'
He said it was impossible to say when Sichuan Expressway would be able to proceed with the acquisition and the A-share issue.
On June 4, Sichuan Expressway revealed it had signed an agreement to acquire the parent's entire interest in the toll road for 777 million yuan, a deal it planned to fund through a maiden A-share issue. The toll road connects Chengdu and the tourist city of Le Shan in Sichuan.
About two weeks later, Oriental Harvest informed Sichuan Expressway of its 60 per cent shareholding in the toll-road project, citing an agreement with Sichuan Highway in 2000.
According to a Sichuan Expressway statement yesterday, Oriental Harvest and Sichuan Highway signed a joint venture agreement in 2000 under which Sichuan Highway would contribute to the joint venture's share capital in the form of a 40 per cent stake in the toll-road project.
Sichuan Highway would inject its remaining 60 per cent stake in the joint venture for 1.24 billion yuan, a consideration supposed to be paid by Oriental Harvest.
The arrangement would have given Oriental Harvest a 60 per cent interest in the joint venture. Sichuan Expressway said it was unable to verify whether Oriental Harvest had settled the payment due to a lack of evidence.
The Sichuan Expressway official added that information about Oriental Harvest was also limited, except that it was known to be a Hong Kong incorporated company.
The joint venture had failed to obtain necessary approvals from state-owned asset administration authorities in Sichuan, the Sichuan Expressway statement said.
The company said it had inspected business registration files at the provincial Industrial and Commerce Administration in May, which showed Sichuan Highway's 99.18 per cent stake in the toll-road project.
Analysts had previously expressed concern about the profitability of the toll-road project, which saw its net loss widen 6.83 per cent to 52.36 million yuan last year, while its net liability soared 40.13 per cent to 182.83 million yuan.
Sichuan Expressway shares edged up 1.07 per cent to 94 cents yesterday.