Stone pays HK$1.17b to buy into nutrition business
( 2003-12-16 01:27) (China Daily)
Stone Electronic Technology Ltd bought in the profitable consumer healthcare industry with its acquisition of a Shanghai-based company yesterday.
The Hong Kong Stock Exchange-listed electronic firm said yesterday in a statement that it would pay HK$1.17 billion (US$150 million) to buy the entire assets of Central New, registered in the British Virgin Islands but holding 75 per cent stakes in the Shanghai-based GoldPartner Biotech.
Stone Electronic will finance the purchase with HK$600 million (US$76.92 million) cash from internal resources and by issuing HK$572 million (US$73.33 million) in zero-coupon convertible notes with five-year terms.
GoldPartner Biotech, founded by the Chinese entrepreneur Shi Yuzhu, is mainly engaged in making and selling GoldPartner and Naobaijin, two famous nutritional products on the Chinese mainland.
"We consider the acquisition as a strategic move for the group to enter the consumer healthcare product industry, which offers high growth opportunities,'' said Stone Electronic Chairman Duan Yongji.
The sales from GoldPartner amounted to 178 million yuan (US$21.5 million) in the first six months, compared with 88 million yuan (US$10.63 million) for the whole of 2002.
Stone Electronic also cited a third-party report, which said the health product market in the country grew from 2.5 billion yuan (US$302 million) in 1992 to 50 billion yuan (US$6.04 billion) in 2000, to show the prospects of the industry.
With the transaction, to be completed before February 28, Central New owner Shi Yuzhu will hold 38.19 per cent of Stone Electronic and become the biggest holder, while the stakes of the current biggest holder -- Beijing Stone Investment Co Ltd-- will drop from 33.42 per cent to 20.66 per cent.
Its investors did not show much strong feeling about the deal on the Hong Kong Stock Exchange and Stone Electronic's stocks fell 2.41 per cent to 81 HK cents (10 US cents) on the first day after trading was suspended on December 3.
Sam Ho, a senior technology analyst with Hong Kong-based East Asia Securities Co Ltd, said he held a neutral attitude on the deal.
"It can be a strong boost to Stone Electric's earnings,'' Ho said.
Stone Electronic suffered HK$44.8 million (US$5.74 million) of operating losses last year and its net losses in 2001 involved approximately HK$123 million (US$15.77 million).
However, he said that although the computer and electronics businesses of Stone Electronic are highly competitive, it is surprising to see it make such a dramatic change.
"Bio-medicine is a new business for Stone, so whether the acquisition is a success largely depends on the management,'' Ho said.
But he believed that in the long term, the acquisition may be fruitful with the rosy outlook of the bio-medical industry.
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