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Sichuan Hongda to buy two sister firms for 1b yuan

By Zheng Lifei (China Daily)
Updated: 2009-03-06 07:54

Sichuan Hongda Co Ltd, a chemical and mining firm, has made an all-cash offer worth more than 1 billion yuan to acquire stakes in two of its sister concerns from its parent, Sichuan Hongda Group.

The move is expected to increase its metal reserves and property holdings.

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In a statement to the Shanghai Stock Exchange yesterday, Sichuan Hongda said it would buy a 9 percent stake in Yunnan Jinding Zinc Industry Co for 929 million yuan and a 98 percent stake in Sichuan Hongda Jinqiao Hotel for 88.61 million yuan.

The proposed acquisition plan, which must be approved by shareholders, will increase Sichuan Hongda's stakes in Yunnan Jinding Zinc to 60 percent, it said.

"The acquisition, part of the company's efforts to consolidate its core business, will increase its profitability and competitiveness," the company said.

The proposed plan will further cement Sichuan Hongda's leading position in the country's zinc sector, analysts said.

The company shares yesterday rose by 3.87 percent to close at 11 yuan in Shanghai.

Yunnan Jinding, a leading zinc miner, boasts of exploration and mining rights for three mines estimated to be worth 8.5 billion yuan, Sichuan Hongda said in the statement.

"Yunnan Jinding will provide long-term and sustainable benefits to Sichuan Hongda due to its abundant resources and its scarcity in the world," the company said.

The Yunnan-based zinc miner chalked up net profits of 1.27 billion yuan and 1.24 billion yuan in 2006 and 2007 respectively, thanks to the higher metal prices then.

It recorded a net profit of 349 million yuan in the first nine months of 2008, falling sharply as a result of plunging prices and slack demand last year, according to its financial reports.

Sichuan Hongda, whose production and office facilities have been hard hit by the massive earthquake last year, said it is buying the Sichuan Hongda Jinqiao Hotel for its office use.

The hotel, which also includes a large chunk of unused land, would serve as an administrative logistics center for the company, it said in the statement.