China Resources Holdings (CRC) is to purchase a 24.3 per cent stake in Cosmo Machinery Enterprise (CME) and inject its interest in machinery maker Welltech into CME. CRC has agreed to subscribe for 148.5 million new shares in CME for 90 cents each, a hefty 45 per cent discount to CME's HK$1.31 price at close of trading on Friday. Welltech is currently 49 per cent owned by CRC and 51 per cent by Cosmo Holdings, which also holds a 62.4 per cent interest in CME. Under the injection agreement, CME will acquire the machinery maker for $272.9 million, which is to be paid by issuing 148.6 million new CME shares to CRC and 154.6 million to Cosmo at 90 cents each. It will buy out from CME's existing directors their interest in a number of subsidiaries for $21.8 million, to be satisfied by issuing 24.2 million new shares at the same price. CME will also raise $72.9 million by placing 81 million new shares to independent investors at the same price. After the asset injection and placements, CME will be 24.3 per cent owned by CRC, 46 per cent owned by Cosmos and 25.2 per cent owned by the public. Welltech markets its products to China, Hong Kong, Southeast Asia and the United States. The company had net profits of $38.5 million in 1995 and $36.4 million last year. Its net tangible assets totalled $301.3 million as of December 31 last year. CME said it believed the asset injection would provide synergy for its existing business in utilising its distribution and sales networks and streamlining its operations. Following the injection, CRC will nominate two directors to CME's board. The $72.9 million raised from the placing will be used to reduce CME's existing bank borrowings and for general working capital at the company. CME said its move to buy out interest in the subsidiaries from its directors was to avoid potential conflicts of interests. The remaining interest in these subsidiaries is held by their respective managements.