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Toh Han Shih

State-owned conglomerate Hisense Group is close to completing its drawn-out acquisition of scandal-ridden Guangdong Kelon Electrical Holdings, with the announcement of a revised deal to buy a controlling stake in the company from its imprisoned former chairman, Gu Chujun.

Hisense would now pay 680 million yuan for  Gu's 26.43 per cent stake in one of the country's largest producers of refrigerators and air-conditioners, Kelon  said on the Shenzhen Stock Exchange's website yesterday.

Under the previous agreement, Hisense would have paid a maximum of 900 million yuan for the stake, which could be revised after an audit of Kelon's assets.

Hisense signed the original agreement in September last year, just days after  Gu was arrested by mainland police for alleged economic crimes, including embezzlement of funds from Kelon.

'Both sides are very close to an agreement, although two months ago, it looked like the deal might be off,' an investment banker said.

The major stumbling block to the agreement had been disagreements over price, the banker said.  'Gu wanted more money as he and his companies have a lot of debt. But Hisense thought Kelon was not valuable, which is a valid opinion.'

Last year, after news that the China Securities Regulatory Commission was investigating financial improprieties at Kelon, the firm's production fell drastically as it lost customers and employees.  Gu was dismissed as Kelon's chairman in August last year.

Meanwhile, mainland media  reported that the local government of Shunde,  where Kelon is based, had agreed to give  Gu 220 million yuan to pay back the funds he allegedly embezzled.

However, Kelon said it had no details of such a transaction.

'Shunde has a lot to lose if Kelon doesn't survive as the impact would be huge. The Shunde government has a huge stake in Kelon's fate,' an industry source said.

Kelon employs about 10,000 people in its factories and offices in Shunde and it is a major source of tax revenue.



Hisense's purchase of Kelon nears completion