Huatian Hotels’ offering of 30 million shares at RMB5.51 per share for a total of RMB1.653 billion has been snapped up by Huaxin Turbine. Equivalent to 29.44% stake of Huatian Hotels, the investment makes Huaxin the hotel group’s second largest shareholder after the Huatian Group that holds 32.48%.
Scramble for SOEs amid mixed ownership reforms
Huatian Hotels stated that this private placement is in response to calls to reform state-owned enterprise (SOE) with mixed ownership. The additional funds will also help improve its asset and liability structure, bolster existing hotel operations and accelerate the development of its Zhangjiajie project.
With this private placement, Huatian Hotels became the first listed state-owned enterprise in Hunan province to enter the mixed-ownership stage.
The majority of SOE groups in Hunan are still in the stage of putting forth corporate proposal applications for reform in line with the provincial government’s “one company one proposal” guideline. This was outlined in the province’s official “Notice on furthering the reforms of SOEs” issued in April 2014.
Market analysts maintain a positive outlook for Huatian Hotels’ future capital operation and strategic transformation as it attracts strategic investors and improve its property rights system to take advantage of the integration in the industry amid SOE reforms.
RMB1.6 billion in cash for private placement
According to its May 30 private equity placement proposal, Huatian Hotels intended to issue only 150 million shares to raise RMB600 million, but Huaxin Turbine splashed out with RMB1.653 billion in cash for 29.44% equity in Huatian Hotels in the deal.
With the windfall, Huatian Hotels will spend RMB1 billion to repay bank loans and earmark RMB350 million for the Huatian Tiancheng Hotel in Zhangjiajie carrying out renovation, adding a cultural center as well as boosting hotel operational capital .
As a further indication of Huaxin Turbine’s commitment to long-term strategic investment, the stock lock-up period for Huaxin Turbine’s investment has been extended from the previously agreed one year to three years.
Established in December 23, 2014 with RMB1.653 billion capital subscription, Huaxin Turbine was clearly incorporated specifically for this acquisition. It is formed of six capital partners, among them ZKenergy, Modasi Investment and Zhongnanshan Investment contributed RMB1.448 billion, 87.61% of the total.(Translation by David)
