Lai Sun Development (LSD) and its subsidiary, Lai Sun Hotels (International), received a mixed response from the stock market after announcing a proposed HK$1.08 billion asset swap. LSD said on Thursday it was proposing to inject its 9.87 per cent stake in Sunday Communications and other high-technology assets into Lai Sun Hotels. LSD shares fell 3.7 per cent to 26 HK cents. Lai Sun Hotels rose 6.94 per cent to 38.5 HK cents. In return, Lai Sun Hotels will transfer to LSD its hotel and real estate assets, worth HK$685.4 million. They include a 65 per cent stake in the Ritz-Carlton Hong Kong in Central. The balance of HK$400 million will be deducted from a HK$1.9 billion outstanding loan LSD owes Lai Sun Hotels. It must repay the remaining HK$1.5 billion by December 31, 2002. Analysts said the reorganisation was not unexpected, as LSD had announced its intention to transform Lai Sun Hotels into a high-technology vehicle. LSD director Keith Wu Shiu-kee said both companies would benefit from the asset-swap agreement as the move would streamline the group's operations. He said LSD shares had fallen as the market had not digested the news, while the surge in Lai Sun Hotels shares yesterday was helped by the rebound in hi-tech stocks and was not caused by the agreement. Mr Wu said it was a fundamental restructuring and no future major reorganisation between the two companies was expected. LSD's 9.87 per cent interest in Sunday is valued at HK$513.3 million. Other assets to be sold to Lai Sun Hotels include a 33 per cent interest in China Economic Information Net (HK), which operates the chinagator.com and cei.com.hk Web sites and a 25 per cent stake in HKATV.com valued at HK$244.8 million. In March, LSD bought the ATV.com stake from ATV for HK$150 million. Mr Wu said the content of the portal had improved since March, which had boosted the value of the Web site. LSD will also inject an advertising business and a company called eSun 168.com. Assets to be transferred from Lai Sun Hotels to LSD include hotel investments in Vietnam, a golf club in Guangzhou and an investment in a London restaurant. Mr Wu said LSD's financial position was expected to improve after it sold a 65 per cent stake in the Furama to Pidemco Land and AIA for HK$1.84 billion.