China Huatong Distribution & Industry Development Corp, controlled by what was the mainland's Ministry of Internal Trade, may take over the Hong Kong listed Ocean-Land Group. China Huatong president Jia Hongsheng said he would not 'rule out any possibilities' after the company yesterday agreed to acquire an 11.15 per cent stake in Ocean-Land. 'If we are to acquire a controlling stake, we have to obtain approval from the China Securities Regulatory Commission,' he said. China Huatong, which is engaged in the distribution of production materials, warehousing, transportation, manufacturing, commodity distribution and trading, will become the second-largest shareholder. The Ministry of Internal Trade was rolled up into the new 'super ministry' as part of the reforms announced at the National People's Congress. Under the terms of the deal, China Huatong is to sell a 75 per cent stake in a heating supply system trader Galaxy Gain to Ocean-Land for about $520 million. Ocean-Land will then pay $320 million in cash and the balance through the issue of new shares to China Huatong. The stock element is equivalent to 100 million shares, or about 11.15 per cent of the enlarged issued share capital, at a price of $2 per share. The issue price represents a 39.62 per cent premium to the average closing price of $1.4325 in the 10 trading days to Wednesday. The purchase price is about 16 times the projected earnings of Galaxy during the first two years or about three times the earnings during a 10-year period. Ocean-Land director Chung Ho said Galaxy yielded an internal rate of return of 20 per cent. The potential takeover follows a memorandum of understanding signed last Thursday. This provided Ocean-Land with the first right of refusal to participate in any projects undertaken by China Huatong. Ocean-Land, formerly Ocean-Land Development, was bought out by a joint venture between chairman Yuen Wai and Mongkon Cherloemchoedchoo last October.