by winston » Mon Dec 07, 2015 10:26 am
not vested
Shanghai Electric Jumps On Parent Bailout
By Shuli Ren
Shanghai Electric (2727.Hong Kong) entered an asset swap deal with its state-owned parent, trading its loss-making Shanghai Heavy Machinery Plant for four of its parents’ subsidiary and some land.
Shanghai Electric will fund its purchases from the parent by issuing new shares.
Specifically, Shanghai Electric will sell Shanghai Heavy Machinery Plant at a symbolic price of 1 yuan. It will receive the four subsidiaries at 3.5 billion yuan and its parents’ properties rights at 2.9 billion yuan.
The 6.3 billion yuan acquisition will be mostly funded by share issuance at 10.41 yuan apiece. Shanghai Electric closed at 5.48 Hong Kong dollars last week.
This is a great deal for Shanghai Electric.
First of all, by removing the loss-making Shanghai Heavy Machinery Plant, Shanghai Electric’s earnings could by improved by 30%, or 570 million yuan, estimates Deutsche Bank.
Second, Shanghai Electric is issuing new shares at the A-share valuation, more than doubling its H-share price. “A higher-priced A share issuance will benefit H shareholders with BVPS enhanced by 16%,” estimates Deutsche analyst Michael Tong.
This deal “demonstrates strong parentco supports,” wrote Deutsche. Shares of Shanghai Electric jumped 7.9% at the open this morning.
Source: Barron's Asia
It's all about "how much you made when you were right" & "how little you lost when you were wrong"