Shell Electric divisions pull out of 12 mainland ventures
SHELL Electric Mfg (Holdings) announced yesterday its associated companies were to withdraw the recent acquisition of a 60 per cent stake in each of the 12 joint-venture companies in Shunde, Guangdong province, because of the pessimistic prospects for these firms.
The company also announced it would take part in another large-scale investment in Shunde city - the development of the Shunde-Panyu highway project.
The acquisition of 12 companies, worth nearly $863 million, was announced at the end of last year.
The associated companies - 50 per cent owned by Shell Electric - were established when the Yung family, Shell's major shareholder, agreed to acquire from Eastern Revenue 12 mainland companies mainly involved in electric, construction, fabrics and real estate businesses.
According to Shell Electric, the equity capital of most of the joint ventures had not been funded in accordance with the provisions of the mainland law on sino-foreign joint ventures, and contrary to the representations and warranties given by Eastern Revenue pursuant to the joint-venture contract.
The decision to withdraw was made when the company also predicted poor prospects for some of the manufacturers companies in the face of keen competition in the domestic air-conditioner market.
Despite the rescission of all contracts, Shell Electric said the the company would suffer no significant losses because the Yung family had agreed to bear solely any loss resulting from the move.
The associated companies had paid the first instalment of 240 million yuan (about HK$217.37 million) to the seller. Of this, the amount attributable to the company is 120 million yuan.
Owing to the rescission of the contracts, only 140 million yuan will be repaid. However, the company said 'the Yung family has agreed to bear solely any losses resulting therefrom'.
The company also announced its wholly owned subsidiary Pearl River Resources had agreed to team up with Shunde City Highway Construction Investment to build and operate a 40-kilometre grade one highway.
Shell Electric will have a 53.1 per cent stake with the balance to be held by the mainland partner.