China Rongsheng Heavy Industries Group Holdings Ltd, the nation's largest privately-owned shipbuilder, said it will acquire Anhui Quanchai Group Corp for 2.15 billion yuan to gain a foothold in the high-speed diesel engine market.

Jiangsu Rongsheng Heavy Industries, an approximately 96 percent owned subsidiary of the group, has won a bid to fully acquire the equity interest of Quanchai Group, Rongsheng said in a statement to the Hong Kong Stock Exchange on Tuesday.

Quanchai Group, which is currently wholly owned by the government of Quanjiao County of Anhui Province, holds about 44.39 percent of Shanghai-listed Anhui Quanchai Engine Co, according to the statement.

It added that for the full year of 2010, Quanchai Group earned some 138.14 million yuan in net profit, up 4.14 percent from 132.65 million yuan a year earlier. Its net assets stood at approximately 1.93 billion yuan at end-2010.

The transaction will allow Rongsheng to position itself as a diversified heavy industry conglomerate through leveraging its capability in producing low-speed diesel engines and enhancing its ability to enter into that particular market, which is the principal business of Quanchai Engine, according to the statement.

Shares of Rongsheng dropped HK$0.09 or 1.29 percent to close at HK$6.89 in Hong Kong trading Tuesday, compared with the 0.54 percent fall in the citys benchmark Hang Seng Index.

With yards in eastern China's Jiangsu and Anhui provinces, Rongsheng is mainly engaged in four business segments, including shipbuilding, offshore engineering, marine engines and engineering machinery.

With acquisition Quanchai Group already being in quite close proximity to Rongsheng's production plants, Winnie Guo, a Beijing-based analyst at CCB International told China Daily that she expects the high-speed diesel engines business Rongsheng has acquired this time will primarily serve to meet the needs of its own engineering machinery works.

"The prospects of the company will become even brighter after the deal, as the purchase will be helpful in its capacity expansion in one of its core engineering machinery segments," said Guo.

China Daily

(HK Edition 04/27/2011 page2)