Guangzhou Automobile Group, the sixth-largest carmaker on the mainland, will realise its long-awaited dual-listing plan by privatising its Hong Kong-listed subsidiary Denway Motor.
According to a joint statement posted by Guangzhou Automobile and Denway yesterday on the Hong Kong stock exchange, Guangzhou Automobile would seek to list H shares in Hong Kong without offering shares for public subscription.
Guangzhou Automobile will instead issue H shares in exchange for Denway's existing shares as a way of launching the privatisation. The ratio of H shares to be issued will be determined at a later stage after regulatory approval. Guangzhou Auto is already listed in Shanghai.
Shares of Denway rose 7.58 per cent yesterday to HK$4.97 after the company made the announcement, against a drop of 0.65 per cent in the Heng Sang Index.
Guangzhou Automobile holds 37.8 per cent of Denway, while Templeton Asset Management has 13.99 per cent.
Denway operated a 50-50 joint venture with Honda Motor, which produces the Accord, City, Fit and Odyssey.
Rachel Miu, analyst of DBS Group Research, said in a note to investors that the share exchange ratio will be based on several factors, taking into account the asset values and the earning potential of Denway after the Hong Kong-listed unit is enlarged.