A share-exchange plan puts franchised transport operators Citybus and New World First Bus under one umbrella The Cheng family has unveiled a complicated plan to reorganise its privately and publicly owned transport operations, which analysts say will pave the way for a separate listing. The long-awaited plan, involving share exchanges within the family's companies, puts Hong Kong Island's franchised bus service providers Citybus and New World First Bus Holdings under one umbrella. To be called Merryhill Group, it will be equally owned by the Cheng family's privately owned vehicle Chow Tai Fook Enterprises and its listed service flagship NWS Holdings (NWSH). NWSH chairman Henry Cheng Kar-shun said the reorganisation would utilise resources, reduce overlapping services, avoid unnecessary competition and simplify the ownership structure of the firms. The family bought Citybus for $2.2 billion in June. It would also help relieve NWSH's debt burden by $1.5 billion to $5.4 billion, or its gearing by 13 percentage points, to 49 per cent, he said. 'The reorganisation will benefit passengers and shareholders,' Mr Cheng said yesterday. Analysts said the move could lead to a separate listing of the transport empire but Mr Cheng dismissed the possibility of this 'at the moment'. 'We are restructuring the shareholding of the two bus companies and the next step will be dealing with overlapping bus routes,' he said. 'We will negotiate with the government and district councils about route restructuring and any decisions will require their approval.' Mr Cheng promised there would be no lay-offs among front-line staff. However, the company will offer voluntary redundancy to, and implement natural attrition of, the 400 management staff of the combined firms. A prerequisite to the restructuring is a reduction in the difference in equity values between Merryhill, which owns all of Citybus, and New World First Holdings, a wholly owned vehicle of NWSH. New World First Holdings has a stake in New World First Bus. Merryhill's equity value stood at $306.8 million based on a business enterprise value of $2.45 billion and net debts of $2.14 billion. New World First Holdings' equity value stands at $101.7 million based on a business enterprise value of $2.09 billion and net debts of $1.98 billion. Merryhill and New World First Holdings will close their equity value gap largely by capitalising their shareholder loans. Merryhill will then pay an undisclosed amount of cash to NWSH to acquire the transport companies and issue an equal number of new shares to NWSH and Chow Tai Fook to create a 50-50 shareholding. Mr Cheng said Merryhill would obtain a refinancing facility of $3.3 billion. He said NWSH's share would be used to repay its debts. 'Merryhill is able to borrow the money without guarantee because of its strong cash flow and profitability,' Mr Cheng said.