China’s O-Net Technologies to finalise acquisition of ITF, CEO says

PUBLISHED : Wednesday, 15 March, 2017, 8:27pm
UPDATED : Thursday, 16 March, 2017, 1:15am

O-Net Technologies Group said problems hovering over its takeover of Montreal-based tech company ITF Technologies have almost been resolved and they are looking forward to sealing the acquisition in the first half of this year.

“We have negotiated and talked with Canada for two years after the issue occurred in 2014,” said Austin Na Qinglin, chief executive and chairman of O-Net Technologies.

“Now the problems have been resolved and hopefully we will seal the deal very soon in the first half of this year,” Na said.

Hong Kong-listed O-Net, a company which mainly engages in the design and sale of optical networking components, was at the centre of a controversy in 2015 when Ottawa halted the takeover of ITF amid concerns the deal could give China access to advanced military laser technology.

Canadian national security agencies wrote in a 2015 review that the deal might diminish “Canadian and allied military advantages”, according to The Globe and Mail.

The main problem, according to Na, was that O-Net was perceived as being a Chinese state-owned company as 27 per cent of the company’s shares are held by a Hong Kong company that is a subsidiary of China Electronics Corp Holdings, a Chinese state-owned enterprise in the electronics information industry.

Na said the concerns over O-Net’s autonomy have been put to rest after discussions with Canadian authorities.

O-Net has been overseeing ITF since an agreement was signed in 2014, even as the official acquisition of the company had yet to be formally completed.

“ITF was in the process of laying off workers when we were first trying to make the deal,” Na said. “After we operated [the company] for two years its profit has doubled and workers’ welfare has been improved.”

In recent years Chinese companies have been dogged by controversy as they seek to acquire overseas firms.

In 2016 China overtook the US in terms of outbound merger and acquisition activity with US$219.3 billion worth of deals announced throughout the year, according to data compiled by Dealogic.

Record year for China’s outbound M&A as it overtakes US for the first time

But the value and number of withdrawn deals also rose over that period, from 31 deals worth US$3.37 billion in 2015 to 45 deals worth US$35.89 billion in 2016.

“Chinese companies should strictly play by the rules of the countries they have business in, especially when it comes to logical business decisions,” Na said.

O-Net acquired French tech company 3SP Technologies recently in a deal valued at US$20 million. The acquisition was relatively smooth, according to Na.

On Tuesday evening O-Net reported 2016 net profit rose 58.3 per cent on year to HK$1.3 billion, mainly driven by a 36 per cent rise in its telecommunications segment that contributed 81.8 per cent to the group’s revenue. The company’s data communications unit saw revenue surge more than 400 per cent to HK$90 million, driven by strong demand from the telecommunications industry.

O-Net’s shares rose sharply during Wednesday’s session, ending 11.4 per cent higher at HK$6.27.