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TCL's 1b-share IPO to fund acquisitions
( 2004-01-05 00:56) (China Daily)

TCL Corporation, a leading consumer electronics producer in China, will launch an initial public offering (IPO) tomorrow to strengthen its core business.

The company will issue about 1 billion A shares, priced at 4.26 yuan (US$0.51) per share with a price/earnings ratio of 15.97, according to the prospectus published yesterday.

The shares will be listed at Shenzhen Stock Exchange.

Li Dongsheng, chairman and chief executive officer of the corporation, said about half of the proceeds raised in the IPO would be used to acquire some companies in the same business and the rest will go towards its new projector TV projects as well as technological innovation.

TCL is interested in buying one or two companies in consumer electronics and telecommunication sectors, which are also its own core businesses, or form joint ventures with such partners, said Li.

Hopefully, he said, the decision will be made this year, but no details or the criteria for choosing the partners can be announced now, he told China Daily yesterday at the company's roadshow in Beijing.

"TCL has reached a considerable business scale as a whole, but it still needs to build up strength for each individual sector. So acquisitions or co-operation with other partners can help us grow strong and increase competitiveness," he said.

Li estimated the company's sales to reach 28 billion yuan (US$3.4 billion) in 2003, up 27 per cent from 2002.

Its overseas business is expected to grow at an even faster pace with a targetted increase of 40 per cent.

The company signed a memorandum of co-operation with French electronics maker Thomson in November, planning to set up a joint venture in Hong Kong, with TCL controlling 67 per cent and Thomson 33 per cent.

The venture is expected to distribute more than 18 million colour TVs a year, which accounts for about 10 per cent of global market sales.

Li said the deal would be implemented this year and the alliance would create the world's biggest colour TV supplier.

Founded in 1981 in Huizhou in South China's Guangdong Province, TCL is the second biggest producer of colour TVs and cell phone in China, statistics said.

But competition in China has been fierce in both sectors.

"Compared to the companies in sectors that enjoy a monopoly, like power and energy, consumer electronics companies have to work harder to make profits and stay in business," said Zhao Xinyu, an analyst at China Asset Management Co, a Beijing-based fund manager.

He said TCL should have a clearer business orientation and enhance core competitiveness.

For Li Dongsheng, technological innovation and advanced management and marketing are two weapons that would help TCL maintain the leading position.

"We must enhance our technological development and have our own intellectual property," said Li.

Good marketing and management upgrades are also essential to ensure profitability amidst the harsh competition and increase the pace on its overseas expansion.

Li aims to build TCL into an internationally competitive company in the business of multi-media display and mobile information terminals in the next three to five years and maintain the lead in home appliances, information and electrical products in the domestic market.

TCL's IPO will also give the Shenzhen Stock Exchange a fresh impetus. The exchange began suspending new share issuance and IPOs three years ago, due to preparation for the second board.

To facilitate the listing of the entire company, TCL Corporation will also allow shareholders of its subsidiary TCL Communications Equipment Co Ltd to swap their stock for the IPO shares.

The subsidiary will be entirely absorbed by the parent company TCL Corporation after the IPO finishes.

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