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 Share restructuring for 4 Chinese companies (zt). |
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ceo/cfo
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作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
In China, Share Restructuring
Finds Owners Amassing Control
By JAMES AREDDY
Staff Reporter of THE WALL STREET JOURNAL
May 19, 2005; Page A12
SHANGHAI -- When Chinese government entities and other big shareholders last month got permission to start cashing out of listed companies, the market feared a flood of selling. Instead, the dominant owners are moving to consolidate control of their companies.
So while China has started the process of converting large chunks of nontradable shares into tradable ones, there might be little change in who calls the shots at many of them.
The 1,400 companies listed on stock markets in Shenzhen and Shanghai won approval in late April to begin making all of their shares tradable. The sweeping policy change could pave the way over the next few years for a wholesale restructuring of how China's markets operate. Currently, the biggest holders of stock in China are often government entities but their equity isn't tradable on the exchanges.
While change is critical for bringing stock trading more in line with market principles, China's investors have long lived in dread that any move to make all stock tradable would flood the market with supply and further depress prices. Official figures show 64% of the $448.1 billion in market capital at the end of last year was nontradable.
Four companies are involved in a pilot program for converting nontradable shares. To win the support of small investors who need to approve the conversion plans, big shareholders in the four are dangling offers of cash and free shares.
Yet the giveaways also show how some big shareholders want something potentially more valuable than cash: continued power.
Because of the enticements, the plans have been met with a warm response. Share prices of three of the initial four companies surged the 10% maximum permitted on the day the share-transfer details were unveiled. The rosy performance contrasts with the broader market's successive drops to new six-year lows.
The government appears pleased with the early results and is reminding the market that permission to sell stock isn't the point of the exercise. China Securities Regulatory Commission Chairman Shang Fulin said in an interview with the official Xinhua news agency published May 15, "The reform will change the difference of interests between different shareholders, improve listed company quality and enhance the public's confidence in holding shares."
Still, continued weak performance of the broader market suggests many investors remain skeptical. Since regulations outlining how all stock could become tradable were published in late April, the benchmark Shanghai Composite Index has lost 4.8% It closed at 1102.97 yesterday, a 0.3% gain from Tuesday that left it near the lows last seen in May 1999.
Stock selling has been particularly heavy for companies rumored to be gearing up to join the conversion program.
In such an atmosphere, it was surprising that some companies rushed to be part of the state plan. Among those jumping when the China Securities Regulatory Commission said on April 29 it would accept applications to launch share restructuring was privately run Shanghai Zijiang Enterprise Group Co., which makes plastic Coke and Pepsi bottles.
A week later, Zijiang was named to spearhead the effort along with equipment maker Sany Heavy Industry Co., coal group Hebei Jinniu Energy Resources Co. and a university-controlled computer maker, Tsinghua Tongfang Co.
Getting there required Zijiang officials such as Gao Jun, vice general manager and company secretary, to cancel plans for the weeklong May Day holiday. Mr. Gao, then halfway across the country visiting family, says he was called back to headquarters to prepare legal documents, board meetings and communication strategies.
"It was quite crazy, and we worked every day [during the holiday] until one or two o'clock in the morning," Mr. Gao says.
Why was the company willing to risk the wrath of public shareholders by its eagerness to sell shares? Because, Mr. Gao says, his bosses saw a way to capitalize: "The biggest shareholder itself doesn't have the inclination to transfer the power."
In fact, Zijiang's biggest shareholder undertook to hold shares in the listed company longer than required by the regulations. Mr. Gao says making all the shares tradable will align the interests of all shareholders and focus top holders on the share price. The company's largest shareholder is a company controlled by its founder, Shen Wen, and it has vowed not to sell more than 10% of Zijiang's equity even after a required lockup period.
Unclear at this stage is how relevant the four deals under way might be for China's broader restructuring effort. Each company is midsize, has a relatively simple share structure and is scandal-free. Zijiang and Sany were launched as private enterprises, unlike the bulk of listed companies that are essentially state-owned enterprises where there may be less desire to introduce more market discipline.
But the four blueprints have similarities that signal how overhauls might play out. Each has offered to give public shareholders bonuses in the form of shares valued somewhere between the net asset value and the prevailing share price. For investors, that amounts to free money.
In three of the four cases, the largest investor has proposed to forfeit a portion of nontraded shares, which are then converted into tradable stock and distributed to public investors -- leaving the total number of shares unchanged. In addition to handing out shares, Sany wants to give investors some straight cash.
A sustained presence by the major shareholder is a likely outcome of the first four restructuring deals. In each, the top shareholder will retain a big enough stake to greatly influence operations. Zijiang's biggest shareholder, a company ultimately controlled by Shanghai mogul Mr. Shen, will see its holding fall to 29% from 37%. Sany's biggest investor stands to be reduced only to 65%, from 72%.
But if minority shareholders approve the measures, which analysts see as likely, they also will vote themselves into a weaker position. Since December, any major corporate transaction at a listed company has required approval by two-thirds of public shareholders. Once all shares become tradable, only half of all shareholders will be needed to carry a motion.
When paring ownership while retaining influence is an alternative to selling their full stakes, for some companies "it is natural to choose this method," says Li Chunbo, an analyst at Citic Securities Co.
作者：ceo/cfo 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 Share restructuring for 4 Chinese companies (zt). -- ceo/cfo - (6645 Byte) 2005-5-20 周五, 05:32 (1020 reads)
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