CATIC Shenzhen Holdings Ltd, an investment holding company, said on Thursday it is on course to acquire 12 companies for 4.16 billion yuan ($650 million) from parent AVIC International Holding Corporation and affiliated firms.

The target companies are engaged in businesses ranging from trading, logistics and overseas engineering to commercial properties.

The company will issue domestic shares and perpetual subordinated convertible securities (PSCS) - or perpetual bond - to fund the purchase, which, upon completion, will see the total number of issued shares of CATIC Shenzhen increase to 1.11 billion.

AVIC International and AVIC International Shenzhen Company Ltd will own 39.37 percent and 35.63 percent respectively of the enlarged share capital. Meanwhile, AVIC International and connected parties will also hold 2.78 billion yuan worth of PSCS, which can be converted to the company's shares at a conversion price of HK$4.03 per share.

The chairman of CATIC Shenzhen, Wu Guangquan, said the company will continue to acquire assets from its parent company AVIC International when appropriate.

AVIC International, whose operations cover a wide range of areas including international aviation, trading and logistics, retail, property and electronics etc, will become the single largest shareholder of CATIC Shenzhen when the latest transactions are completed.

The overall economy is still plagued by many uncertainties, Wu said, but he believes that the company's diversified business model will withstand challenges.

Retail business growth is gathering pace, with Shenzhen Fiyta Holdings Ltd, a subsidiary of CATIC Shenzhen which sells luxury watches, seeing its half-year profit double from a year ago.

CATIC Shenzhen recorded a net profit of 20.86 million yuan for the six months ended June, an increase of 7.32 percent from the corresponding period last year.

And the company is expecting a bigger revenue and profit contribution from its commercial property business. Of the 12 companies to be acquired, seven are engaged in the property business. The latest acquisition means the commercial property business segment will account for 20 percent of the company's total revenue and more than 30 percent of its profit.

Wu is upbeat about the growth of the commercial property business, which he expects "will grow in line with the overall economy." Property operations at CATIC Shenzhen enjoy a gross profit margin of 15 percent, according to the chairman.

CATIC Shenzhen last traded at HK$3.23 per share on Wednesday. The Hong Kong Stock Exchange was closed on Thursday due to Typhoon Nesat.

Billionaire Li Ka-shing last month increased his stake in CATIC Shenzhen to 10.67 percent.

emmaan@chinadailyhk.com

China Daily

(HK Edition 09/30/2011 page2)