Cofco asset boost for Hong Kong unit seen moving slowly
Food trader says property company injections into Parkview will be subject to strict scrutiny
Cofco, the mainland's largest food trader and processor, expects the injection of assets from its property companies into Hong Kong Parkview will take time due to strict scrutiny by mainland and Hong Kong regulators.
China National Cereals, Oils and Foodstuffs Corp (Cofco) will inject mainland commercial, office, and hotel properties into the Hong Kong-listed company it acquired this summer, according to Cofco chairman Ning Gaoning.
The injection, including assets of Joy City, a popular dining, shopping, and entertainment complex, will be made gradually, Ning said on the sidelines of the Communist Party's 18th national congress on Tuesday night.
In July, Cofco (HK), a wholly owned subsidiary of the mainland food giant, announced it would acquire a 73.5 per cent stake in Parkview, in a bid to turn it into a listing vehicle for Cofco's property businesses.
"The property businesses bring about stable earnings," said Ning. "We hope the transfer will be completed as soon as possible, but the approval procedure could be slow because we have to go through strict scrutiny by mainland and Hong Kong regulators."
Cofco's 10 Joy City outlets in Beijing, Shanghai, and other major cities have a combined floor area of about 4.68 million square metres, and the chain is estimated to be worth at least 20 billion yuan (HK$24.7 billion).
The acquisition gave Cofco access to capital markets at a time when listing on the mainland stock market is difficult this year amid property curbs. However, Hong Kong regulations stipulate that asset injections should be treated as an initial public offering and scrutinised accordingly if injected assets have higher earnings, market value, or assets than the shell company, within 24 months of an acquisition of more than a 30 per cent stake.
"We've always been looking for opportunities to acquire overseas resource suppliers," Ning said. "However, it is hard to find acquisition targets as many foreign large-scale agriculture companies have been fully consolidated, although I think opportunities still exist in producers in Brazil, Argentina, Australia, the United States, and Canada."
Ning, 54, is one of the first group of professional managers at state-owned enterprises. Born in Shandong, he has a business degree from the University of Pittsburgh and after graduation in 1987, he joined China Resources (Holdings), a mainland-backed Hong Kong conglomerate.
Cofco became the largest shareholder of Mengniu Dairy last year after the contaminated milk scandal and Ning joined as chairman.