Chinese medicine maker Tung Fong Hung (Holdings) plans to launch a rights issue to raise at least $56 million, paving the way for substantial shareholder ITC Corp to tighten its grip on the firm. ITC, a diversified investment company, has undertaken to subscribe its portion of rights shares on a four-for-one basis, which will raise its stake to 54.1 per cent from an existing 12.8 per cent. The exercise will also allow Tung Fong Hung to reduce debts and fund its expansion in marketing new products in Canada, Hong Kong, Singapore and Taiwan. Tung Fong Hung said yesterday it planned to issue at least 374.05 million new shares to qualified shareholders at 15 cents a share. The sale price represents an 80.51 per cent discount to Thursday's closing, the last day of trading. Trading is expected to resume today. ITC will subscribe for 48 million shares and has also agreed to take up another 192.72 million shares. The cash call will cost ITC $36 million. ITC plans to seek an exemption from the Securities and Futures Commission from making a general offer as the subscription will trigger the takeover threshold of 35 per cent. Completion of the rights issue depends on approval from Tung Fong Hung's shareholders including ITC, Hanny Holdings, Hutchison Whampoa and minority shareholders. ITC said it would announce later the arrangements regarding its subscription of the new shares. The rest of the new shares will be underwritten by brokers Tai Fook Securities and Pacific Challenge. Tung Fong Hung said it would spend about $25 million strengthening the distribution of health food.