Guangzhou Auto set to achieve dual listing
Guangzhou Automobile Group, the sixth-largest carmaker on the mainland, will realise its long-awaited dual-listing plan by privatising its Hong Kong-listed subsidiary Denway Motor.
According to a joint statement posted by Guangzhou Automobile and Denway yesterday on the Hong Kong stock exchange, Guangzhou Automobile would seek to list H shares in Hong Kong without offering shares for public subscription.
Guangzhou Automobile will instead issue H shares in exchange for Denway's existing shares as a way of launching the privatisation. The ratio of H shares to be issued will be determined at a later stage after regulatory approval. Guangzhou Auto is already listed in Shanghai.
Shares of Denway rose 7.58 per cent yesterday to HK$4.97 after the company made the announcement, against a drop of 0.65 per cent in the Heng Sang Index.
Guangzhou Automobile holds 37.8 per cent of Denway, while Templeton Asset Management has 13.99 per cent.
Denway operated a 50-50 joint venture with Honda Motor, which produces the Accord, City, Fit and Odyssey.
Rachel Miu, analyst of DBS Group Research, said in a note to investors that the share exchange ratio will be based on several factors, taking into account the asset values and the earning potential of Denway after the Hong Kong-listed unit is enlarged.
The net book value and total assets of Denway stood at 13.7 billion yuan (HK$15.5 billion) and 14.6 billion yuan respectively as of June 30 last year. The company was estimated to have net cash of 5.5 billion yuan by the end of last year and no debt.
Analysts explained the exchange ratio would be critical to the privatisation of Denway, as an unfavourable offer may lead to voting down of the plan by individual investors.
Guangzhou Automobile, which is the joint venture partner of Japan's Toyota Motor and Honda Motor, has wanted to sell shares since 2002.
However the depressed state of the car market due to credit tightening by the central government in 2004 dampened its plan.
In 2006 its listing plan had to be indefinitely postponed as it restructured its red chip subsidiary Denway to incorporate the dual-listing plan.
Guangzhou Automobile plans to build domestic-brand and environmental friendly vehicles in response to the central government's directives.
