Xian Aircraft acquires parent's military assets

PUBLISHED : Tuesday, 17 July, 2007, 12:00am
UPDATED : Tuesday, 17 July, 2007, 12:00am

Shenzhen-listed Xian Aircraft International Corp will buy military aircraft assembly lines from its parent, the first such purchase by a publicly traded company following Beijing's move to allow private sector involvement in the defence industry.

Xian Aircraft also will buy parts factories for the mainland's first regional jet, the ARJ-21, in addition to the military assembly lines as part of the six billion yuan deal involving share sales to parent Xian Aircraft Industry (Group) and other investors.

Except for some core military models, all related production lines will be acquired, the listed company said, without providing details.

'We can't provide details on what kind of military aircraft will be injected into the listed company, as it is subject to national security,' said a Xian Aircraft official.

The parent firm is also a subsidiary of China Aviation Industry Corp I (Avic I). It produces two bombers, the FBC-1 and 6D, according to the website of Avic I.

The H-6D, originally a Russian bomber, began trial flights in 1981. It can carry two air-to-ship missiles under both wings.

Xian Aircraft Industry developed the FBC-1, a more advanced model that can launch air-to-ground, air-to-sea and air-to-air attacks.

The State-owned Assets Supervision and Administration Commission and the National Development and Reform Commission released a joint paper last month encouraging foreign and private capital to invest in the military industry. Some core military corporations will remain solely owned by the state.

Although information on the scope and size of the mainland's military industry is far from public, the central government has tried to scale down the industry over the past 20 years by forcing many underproducing firms to make goods for civilian use. As a result, the China Weapon Industries Group owns 140 firms involved in research, distribution and production.

ARJ-21, a 75-seat to 90-seat regional aircraft, won its first overseas order last month and will have its first test flight next year. The mainland is aiming to produce a 150-seat or above aircraft by 2020 to tap into the US$2.8 trillion worth of aircraft orders forecast globally by 2027.

Parts for the ARJ-21 are manufactured in factories including Xian, Shenyang and Shanghai. Final assembly takes place in Shanghai.

About 660 million shares at 9.18 yuan each will be offered as part of the deal, with 55 per cent going to the parent company and the remainder to nine unidentified investors.

The acquisition will boost the company's net income about fivefold this year and sales will triple. Shares of Xian Aircraft fell 10 per cent yesterday to 27.78 yuan.