UK firm's China property deal to give London first 'red chip'

THE London stock exchange will get its first ''red chip'' if a proposal by Hongkong's privately held Cathay International Investment to take control of Stonehill Holdings after selling it a China property development portfolio gains shareholder approval.

The British group has conditionally agreed to buy a holding company for a group of China property development and investment companies for GBP51.7 million (about HK$570 million) in newly issued Stonehill shares.

The holding company to be purchased, Cathay United Investment (CUI), lists the 346-room Fu Yan Landmark Hotel in Shenzhen as its principal asset.

Stonehill, a former furniture maker turned property developer, said 117 million of the new shares would be placed with institutional and corporate investors in China, Hongkong and the UK.

At the same time Cathay International, which will hold 74.3 per cent of the enlarged capital of Stonehill, said it would make a general offer for the group. However, Cathay International said it aimed to maintain Stonehill as a publicly listed vehicle for further expansion.

Stonehill owns and manages a trading estate in north London and has a market capitalisation of GBP2.31 million. It recorded a pre-tax loss of GBP170 million for the six months to the end of last September.