Gree Electric shoots up to daily limit as state parent seeks to sell US$6.2 billion stake in ownership shake-up

Gree Electric Appliances surged by the daily limit after the state-owned parent seeks to sell almost its entire stake in China’s biggest maker of air conditioners, a move that analysts said will further improve corporate governance by more aligning the interest between the management and shareholders.

The shares jumped by 10 per cent to 51.93 yuan at the close in Shenzhen on Tuesday, as the stock resumed trading after being suspended over the past five days. Zhuhai Gree Group, Gree Electric’s biggest shareholder that owns 18.2 per cent of the company, plans to sell a 15 per cent stake, the appliance maker said in an exchange filing, without identifying buyers. The deal will be worth at least 41.3 billion yuan (US$6.2 billion), given the statement said the stakes will be sold for no less than the average stock price over the past 30 trading days.

Brokerages including Citic Securities hailed the plan that will lead to a change of the ownership, saying it will improve Gree’s operating efficiency and address the governance issue between the parent and the company.

“If the buyers are the management or third-party strategic investors are introduced to participate in the mixed ownership reform, Gree will be flexible in incentive plans and strategies of returning shareholders in the future,” said Wang Hao and Chen Junbin, analysts at Citic Securities, in a note.

Citic Securities has a buy rating on the company and estimates an 8.3 per cent earnings growth for Gree this year. Among the 27 analysts tracked by Bloomberg, 18 recommend buying the stock, six have hold ratings and three have sell recommendations.