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Hanny in deal to take over troubled Benelux

Adela Ma

HANNY Magnetics (Holdings), backed by Li Ka-shing companies, is to take effective control of financially crippled floppy-disk maker, Benelux International, through a convertible note issue of $240 million.

The long-rumoured deal, which will be completed after the Lunar New Year, will leave Hanny and Benelux as separate companies, according to Hanny managing director Charles Chan Kwong-keung.

Hanny's main shareholders, Cheung Kong and Hutchison Whampoa, would appoint a number of directors to the Benelux board, Mr Chan said.

It was also revealed yesterday that Chinese Estates, which was the largest shareholder in Hanny Magnetics with 29 per cent, has sold down its stake in the company. Sources said an announcement on the sale would be made tomorrow.

Under the Benelux rescue plan, which needs shareholder approval, Benelux will raise $439 million by selling 2.92 billion new shares to existing shareholders on a 10-for-1 basis at 15 cents each - half its last traded price.

If shareholders opt not to take up the shares, Mr Li's companies have undertaken to buy up to 40.5 per cent of Benelux's enlarged capital.

Hanny will take up $240 million in Benelux convertible notes and transfer its two production lines in China to Benelux, which is 55.4 per cent controlled by the Chau family.

Benelux will focus on manufacturing and Hanny on marketing.

Mr Chan said he did not expect the deal to lead to a general offer for Benelux.

Hanny, which has been restructured in recent months, incurred losses of $75 million in the four months to January. In the past financial year it lost $588.7 million.

Benelux incurred a loss of $651,000 in the six months to September 30, against a profit of $20.7 million in the previous year.

The loss was recorded after an exceptional charge of $20.5 million relating to set-up costs at its factory in Northern Ireland.

Mr Chan said Benelux's financial position worsened when banks refused to lend more money.

'They basically had no working capital to run the company,' he said.

To open the Northern Ireland factory, Benelux raised a $110 million loan facility in 1994.

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