Shougang Concord International Enterprises has proposed a group restructuring that could lead to the sale of two subsidiaries - Shougang Grand and Shougang Technology - back to parent Shougang Group.
Shougang Group, the mainland steel giant, would join Cheung Kong (Holdings) to acquire Shougang Grand for 33 HK cents a share, or a 4.35 per cent discount to last Wednesday's closing price of 34.5 cents. They agreed to pay HK$172 million, but would not make a general offer to Shougang Grand.
Cheung Kong would pay HK$30.19 million for Shougang Grand, lifting its stake to 16.15 per cent from 5.02 per cent. Shougang Group would pay about HK$142 million for a 52 per cent stake in Shougang Grand, which owned 46.3 per cent of Shougang Technlogy.
In a series of connected transactions, Shougang Group would inject a 51 per cent stake in a power plant to Shougang Concord for HK$198.2 million. The transaction was conducted at a 5.9 times price/earnings ratio as the power plant generated 70 million yuan (about HK$66.1 million) last year. Shougang Concord was given a minimum profit guarantee of 70 million yuan for the business by Shougang Group this year.
The listed Shougang Concord would pay HK$116 million to parent Shougang Group, largely to offset the proceeds from swapping the two listed companies.
In another move, it also sold a majority stake in its three core joint ventures to its parent for HK$102 million, of which HK$20.4 million was settled with a shareholders' loan. Shougang Concord would leave with a 15 per cent stake in all three Sino-foreign ventures.
