NVC founder's share sale pushes down stock price

Lighting manufacturer's former chairman sells most of his stake, leading to large price fall

PUBLISHED : Friday, 28 December, 2012, 12:00am
UPDATED : Friday, 28 December, 2012, 4:14am

Shares in beleaguered NVC Lighting Holding dropped 9.3 per cent yesterday after announcing that its founder and former chairman Wu Changjiang is selling nearly two-thirds of his shares to Elec-Tech International (HK).

Wu will transfer 372.9 million of his total 587.4 million shares in the lighting manufacturer, which amounts to 11.81 per cent of the issued share capital of the company, according to a filing to the Hong Kong stock exchange.

Shares in Elec-Tech International Co (ETIC), the Shenzhen-listed parent company of Elec-Tech International (HK), or ETHK, dropped 4 per cent yesterday after resuming trading following a six-day suspension, on a day the key Shenzhen index did not move much.

ETIC, also a lighting manufacturer, said in a filing to the Shenzhen stock exchange that it is buying the stock for HK$2.55 each in the HK$951 million deal.

In Hong Kong, NVC shares lost 22 HK cents to close at HK$2.14 yesterday. The Hang Seng Index inched up 0.35 per cent.

"Traditional lighting equipment will be replaced by new technology and the industry is facing fundamental transformation," Wu told mainland media. "ETIC's joining [us] as the largest shareholder will be good for the long-term development of NVC."

Tong Diyi, a general manager at Beijing-based Longwin Asset Management, said selling the shares could have been a tough decision for Wu as founders seldom like to part with their holdings. "They treat their companies like their children," Tong said.

Whether Wu will really hand over NVC's management to ETIC would depend on whether he receives cash or ETIC stock in lieu of his shares, according to Tong.

"If he asked for money, he will leave. But if he is getting shares in ETIC, he may retain his influence in NVC," Tong said.

In May, Wu resigned as chairman and chief executive and Andrew Yan of SAIF Partners, a private-equity firm and the largest shareholder at the time, was appointed chairman.

In August, NVC warned of a large profit fall owing to rising costs, a drop in demand and sales, and Wu's resignation.

A number of senior employees have since resigned, including a vice-president and a general manager, while NVC's distributors and workers have gone on strikes demanding Wu back. In late August, NVC said it had held talks on Wu's possible return.

Yan is still the chairman, but not an executive director.

Separately, ETIC spent HK$703.5 million buying another 260.3 million shares of NVC, or 8.24 per cent of the total.

After the share transfer, Wu will hold 6.79 per cent of the total issued share capital. ETHK will hold 20.05 per cent and become the single-largest shareholder.

NVC is the largest contract manufacturer of lighting in China, according to a JP Morgan report.