NewGuangzhou Shipyard stock surges on asset acquisition

The Hong Kong share price of loss-making Guangzhou Shipyard International nearly doubled in morning trade on news that it has acquired shipbuilding assets.

On the first day of trading since its suspension on April 7, the stock jumped up to 93.8 per cent to an intraday high of HK$26.60 this morning after the shipbuilding firm announced the 5.5 billion yuan asset acquisition. The share price was up 60.3 per cent at HK$22 around 12.30pm, still its highest in six years.

By mid-day, some 45 million of the company’s shares had changed hands in the heaviest trading in nearly 10 years. Meanwhile in Shanghai, the share price rose by the maximum permitted limit of 10 per cent to 18.84 yuan.

On Friday, Guangzhou Shipyard announced it had entered into a conditional agreement to acquire from its state-owned parent China State Shipbuilding Corporation (CSSC) all the shares of CSSC Huangpu Wenchong Shipbuilding for 4.53 billion yuan. It will pay for the acquisition in part by 679.1 million yuan in cash and the rest by issuing yuan-denominated A shares to CSSC.

The same day, Guangzhou Shipyard acquired shipbuilding assets from Yangzhou Kejin Shipyard, a private Chinese shipbuilder fully owned by an individual named Xie Chuanyong, for 968 million yuan. Guangzhou Shipyard will pay for the acquisition party by issuing A shares to Yangzhou Kejin.

To finance its acquisitions, Guangzhou Shipyard’s board of directors resolved on Friday to raise up to 1.83 billion yuan by placing 111.15 million A shares at 16.48 yuan per share to a maximum of 10 subscribers, including fund managers, securities companies, insurers, individuals and qualified foreign institutional investors.