Shares in Jia Sheng Holdings surged as much as 49 per cent yesterday after the company said it planned to acquire a mainland lithium battery company for HK$2.75 billion.
The loss-making securities brokerage resumed trading in the afternoon after announcing the proposed acquisition and saw its shares soar to 39.5 HK cents before closing 11.3 per cent higher at 29.5 HK cents, a one-year record. The stock is up 8.2 times this year.
Beijing is encouraging the development of hybrid cars to combat pollution, making electric battery companies hot property.
BYD, the mainland's best-known battery maker because of its partial ownership by Warren Buffett, has seen its shares jump 5.2 times this year.
The price Jia Sheng is paying for Union Grace Holdings is five times the company's market capitalisation as of yesterday. The deal will be done through a combination of shares and convertible bonds issued at 20 HK cents each, or a 32.2 per cent discount to yesterday's close.
The company said the share and bond issues would not result in any change in control of the company.
Jia Sheng suffered a loss of HK$72.16 million for the year to March, widening from HK$61.22 million a year earlier. It lost HK$14.5 million on a car parts business, which it disposed of in September last year.