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The Straits Times
Aug 25, 2011
Chinese firm eyes Sino-Environment

Takeover bid could give state-owned company listing here

By Jonathan Kwok

A UNIT of a major Chinese state- owned enterprise wants to list in Singapore by taking over the listing status of beleaguered Sino-Environment Technology Group.

This offers some relief for Sino-Environment shareholders.

But for every 1,000 Sino-Environment shares, investors could end up with only four shares in this white knight, Avic International Investments. Still, at least they will be getting something - and Avic International says it has a bright future.

Avic International is the shipbuilding management arm of the Aviation Industry Corp of China Group, which is owned by Beijing and has more than 20 subsidiaries listed in China and overseas.

Singapore's status as a maritime and financial centre is the reason the parent company wishes to list its shipbuilding business here, said Avic International's non-executive chairman Diao Weicheng at a briefing yesterday.

Sino-Environment's creditors and shareholders will vote tomorrow on whether to agree to the proposal, which would see $6 million worth of Avic International shares split between them.

Sino-Environment, suspended from trading since September 2009, is under judicial management. It will be delisted and its mainboard listing status given to Avic International.

To comply with the shareholding spread requirements of the Singapore bourse, Avic International will place up to 65 million shares with institutional investors, which could raise net proceeds of about $28.7 million.

These shares' indicative price range is between 20 cents and 50 cents, and the final price will be determined through book-building. This placement price is also the figure Sino-Environment's creditors and shareholders will look at to determine how many shares they will get. The firm's last traded price was 13.5 cents.

Of the $6 million worth of stock earmarked for them, some $5.32 million of shares will go to creditors, with $680,000 of shares for shareholders.

Shareholders will receive one Avic International share for every 250 shares they hold if the placement price is 50 cents. This figure will change if the placement price is different. Their Sino-Environment shares will then be withdrawn from the Singapore Exchange's official list.

'Sino-Environment is a clean and simple shell for us. So we chose that. This is the simple way for us to be listed on the Singapore Exchange,' said Dr Diao.

Last year, Avic International recorded revenue of 76.5 million yuan (S$14.4 million) and net profit of 56.1 million yuan. It offers management and consultancy services to shipbuilders, such as marketing, client management and project management.

After listing here, Avic International will acquire the ship trading business of its parent company within a year. Within two years, it will acquire the parent company's three shipyards, giving it a shipbuilding capability.

Dr Diao cited the red-hot Chinese shipbuilding industry as a boon for his company. China is tussling with South Korea to be the largest shipbuilding nation in the world, and the sector receives strong support from the government and domestic shipowners.

Asked about the corporate governance scandals that have tarnished the reputation of China firms here, Dr Diao emphasised that Avic International is mindful it is a 'representative of the Chinese government'. 'As a member of... a state-owned company, we are responsible not only for the company, for the investors, but also for the society.'