China's largest logistics firm, state-owned China Chengtong Holdings, has come to the rescue of troubled main-board company China Logistics Group. Chengtong, through subsidiary World Gains (Holdings), has conditionally agreed to buy a 41.5 per cent stake in the mainland-backed logistics firm from the Hong Kong branch of ABN Amro Bank for HK$54.73 million. The sale price of nine HK cents per share represents a 64.7 per cent discount to China Logistics' closing price of 25.5 HK cents before its suspension on May 28. The transaction, authorised by mainland authorities, would make Chengtong ultimately the largest shareholder in China Logistics, which had been marred by controversies and financial trouble, China Logistics said. World Gains would also make a mandatory general offer under the takeover code at 9.04 HK cents per share to gain control of more than 50 per cent of the firm's voting rights. Chengtong, one of the largest state-owned enterprises on the mainland directly supervised by the Central Enterprise Work Committee, is engaged in logistics, metal distribution, project investment, retail and information services. Previously named China Huatong Group, Chengtong appeared to be linked to China Logistics. China Huatong Distribution & Industry Development, a state-owned firm being dissolved on the mainland, owns 6.82 per cent of China Logistics through its wholly owned subsidiary, Trade Sense International. Huatong Distribution has also put in a claim for the 34.68 per cent stake held by Pan Pacific Traders. Pan Pacific is controlled by former China Logistics chairman Yuen Wai and another director. But Huatong Distribution said it was holding the shares in trust on its behalf. Pan Pacific and Trade Sense pledged the latest stake to ABN Amro for a HK$74.1 million loan now in default. As part of the proposed deal, another Chengtong-controlled company has agreed to buy the debt for HK$261,865 after the share sale's execution. China Logistics reported in recent months the sudden departure of Mr Yuen and millions of dollars missing from its coffers. In September, it transpired auditor PricewaterhouseCoopers had walked out after refusing to audit its results for the six months to September last year. China Logistics posted hefty losses of HK$1.12 billion and millions of Hong Kong dollars in provisions for the period. Its situation highlighted the often murky notion of property rights on the mainland and messy management of mainland-backed enterprises. Chengtong intends to hold its stake in China Logistics as a long-term investment and will not change the listed firm's principal activities, which are logistics and property and strategic investment. Chengtong might inject assets that were related to China Logistics, China Logistics said.
