Red chip Yunnan Enterprises Holdings has denied it will be absorbed into a revamped Hong Kong investment arm of the provincial government. Vice-chairman Tie Zhenguo said neither Yunnan Enterprises nor its controlling shareholder South Hong Investment would be injected into the new window company. Yunnan provincial government deputy secretary-general Cai Jingtai said on Tuesday that Hong Kong companies controlled by the government would be restructured and incorporated into a new vehicle. The new company, Yunnan Development, was expected to be officially formed by the end of the year. Mr Cai said South Hong, which owns about 52 per cent of Yunnan Enterprises, would also be put under the banner of Yunnan Development. However, Mr Tie said incorporation of South Hong into Yunnan Development had not been placed on the agenda for discussion by South Hong directors. He also said there would not be any changes to the shareholding structure of South Hong. Mr Tie said Yunnan Enterprises planned to apply to the China Securities Regulatory Commission early next year to buy a tobacco-related business from its shareholders. It would consider all sorts of funding methods, including bank borrowings, share placement and share issue to the parent, as ways to finance the acquisition, company officials said. Yunnan Enterprises had almost $100 million in cash and zero gearing. Mr Tie said foreign and mainland banks had agreed to meet the company's funding needs, partly because of the strong financial situation of shareholder Yuxi Hongta Tobacco (Group). Yuxi Hongta is the mainland's largest tobacco company, earning profits of about eight billion yuan (about HK$7.44 billion) a year. Mr Tie predicted that cigarette manufacturing would remain a pillar industry in the province in the coming decade.
