Hudong Heavy Machinery, a Shanghai-listed diesel engine maker, plans to raise 12 billion yuan from a share placement to fund the purchase of assets in a deal that will make it China's largest shipbuilder. The firm will place 400 million shares at 30 yuan each, of which nine billion yuan will be bought by its parent, China State Shipbuilding Corp. The remainder will go to strategic investors including China Life Insurance, National Social Security Fund, Baosteel Group, Shanghai Electric Group and Citic Group. In return, Hudong will receive a shipbuilding plant in Waigaoqiao in Shanghai and ship-repairing units in Chengxi and Guangzhou, as well as some cash. The firm would become China's biggest shipbuilding firm after the transaction, Hudong's company secretary said. Shares of Hudong, which had been suspended from trading since last Wednesday, jumped 10 per cent to close at a record high of 41.49 yuan yesterday. It has gained more than 33 per cent this year. 'The shipbuilding industry is blooming in China, and more shipyards would have to be built to meet demand,' said China State Shipping spokesman Li Baohua. After the purchase, Hudong's net asset will increase to 13.2 billion yuan from 1.2 billion yuan. Assuming the acquisition took place last year, the company's pro-forma profit would have increased to 1.5 billion yuan from 250 million yuan. Changxing and Longxue shipyards, under construction in Shanghai and Guangzhou, would probably be injected into Hudong after completion, the company secretary said. When completed, Changxing can build four million tonnes of vessels, exceeding that of Waigaoqiao Shipyard, the largest in China. Waigaoqiao Shipyard posted 700 million yuan net profit for the first 10 months last year and completed 3.2 million tonnes of vessels for the whole year. The two ship-repair facilities in Chengxi and Guangzhou made 237 million yuan and 106 million yuan net profit respectively in the first 10 months.