Cash-strapped red chip China Everbright Ltd has ended its ties with locally listed insurer National Mutual Asia (NMA) by selling its 5 per cent stake in the company to raise $648 million. The disposal, following the recent sale of its stake in China Telecom (Hong Kong), is part of China Everbright's efforts to reduce debts and refocus the group by selling off non-core assets. China Everbright yesterday said it had entered an agreement to sell the NMA stake to NMA's Australian parent, National Mutual Holdings, at $6 a share. National Mutual Holdings will increase its holding in NMA from 69 per cent to 74 per cent. The deal will be completed on Friday. The price represents a premium of 9.1 per cent above NMA's closing price on Monday of $5.50. The sale will make a profit for China Everbright of $93 million over the price of $555 million, or $5.14 a share, at which it bought the stake four years ago. China Everbright said it had agreed with National Mutual to terminate their co-operation agreement, signed in 1994, which established a relationship for the two to develop jointly the insurance business in the mainland. Under that agreement, China Everbright had bought its 5 per cent stake of NMA while National Mutual had picked up a stake equal to 4.73 per cent of China Everbright's existing issued capital. NMA chief executive Terry Smith said the agreement had been terminated because the group now had the opportunity of operating a Shanghai life insurance joint venture under the French license of its ultimate parent, French-based Axa. Axa holds 51 per cent of National Mutual, which last year was approved to set up a joint-venture life insurer in Shanghai. The French group agreed NMA could own up to 49 per cent of the joint venture. China National Metals & Minerals Import and Export Corp is the mainland partner that owns the rest of the joint venture. 'The co-operation agreement with China Everbright was aimed at securing us to get a licence in the mainland,' Mr Smith said. 'As we have already achieved that goal under our French parent, it is not necessary to continue the agreement. 'We still consider China Everbright as a good friend and hope to have other chances to co-operate with it in future.' He also indicated it would be better for China Everbright to find another foreign partner. That way it might be able to get approval to operate in the mainland faster than waiting for NMA to get a second licence. ABN Amro analyst Eddie Lau Kwok-lap said the sale was positive for China Everbright, because it would help ease its liquidity problems. In October, the red chip sold one-third of its China Telecom (HK) stake to the market for $838 million to reduce debt. The two asset sales will raise a total of $1.5 billion in cash, sufficient for the red chip to repay a one-year term loan it borrowed to purchase the China Telecom (HK) shares last year, he said. Before the sales, the company said its short-term debts amounted to about $1.5 billion.