Gree’s $1.92b acquisition of new energy company triggers shareholders’ debate

By Ma Jingjing Source:Global Times Published: 2016/10/31 22:03:39

Domestic leading air conditioning company Gree Electric Appliances Inc's 13 billion yuan ($1.92 billion) acquisition of a new energy company has triggered a debate after the appliances maker's relevant financing plan was rejected by its small and medium-sized shareholders on Friday.

The Shenzhen Stock Exchange announced a trading halt to Gree's shares on Monday, amid an ongoing event that may impact the share price.

In August, Gree announced a plan to acquire 100 percent of Zhuhai Yinlong New Energy Co, said a statement on an official information disclosure website cninfo.com.cn.

According to the document, Gree aimed to raise money for the purchase by selling about 835 million new shares at a price of 15.57 yuan per share.

The company's proposal to purchase Yinlong was passed, but the relevant financing plan was blocked by small and medium-sized shareholders at a meeting in Zhuhai, South China's Guangdong Province on Friday, said a filing on the Shenzhen bourse on Monday.

An anonymous capital market insider said this was no surprise.

"The management may want to expand its businesses to the new-energy vehicle sector, which is a rising sector in China. But small and medium-sized shareholders may prefer that company focus on its main business, as the company's profit is increasing fast and Yinlong's future is unclear," he told the Global Times on Monday.

The company is making the acquisition to support the government's drive to clean up the environment and facilitate greener technologies, Bloomberg reported in August, citing Gree Chairman Dong Mingzhu.

Dong has confidence in the core technology of lithium-ion batteries of Yinlong, said a news report on Gree's website in August.

But whether this battery can be the mainstay of the industry has caused debate because of its high costs and low energy density, domestic news portal cnstock.com reported on Monday.

Gree's net profit rose 14 percent year-on-year to about 4.8 billion yuan in the third quarter, according to its financial report disclosed in Shenzhen bourse on Monday.

Shareholders rejected the financing plan because the fundraising channel was not appropriate and the issue price was too low, Reuters reported Monday, citing industry sources.

Gree has abundant cash to purchase Yinlong, which can avoid diluting the holdings of smaller investors, said the Reuters report.

The price of 15.57 yuan per share is almost the lowest for Gree's shares in recent years, it said.

The appliances maker's cash and cash equivalents together with its accounts receivable surpass 100 billion yuan, data from the company's third-quarter financial report showed.

Gree said it would revise the fundraising plan according to shareholders' will, but didn't give details, domestic news portal finance.sina.com.cn reported late on Monday.

The Shenzhen bourse asked Gree on Monday to explain whether its proposals were entirely approved before Friday.

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