(Yicai Global) Dec. 27 -- Shares in Interchina Water Treatment soared by the exchange-imposed limit today after the Chinese sewage treatment company said it plans to purchase equity in debt-ridden fruit juice retailer Beijing Huiyuan Food and Beverage through a third-party in order to branch into the health foods sector.
Interchina Water’s share price [SHA:600187] surged by 10 percent to close at CNY2.78 (USD0.40).
Interchina Water will pay CNY850 million (USD122.1 million) for a 18.89 percent stake in Huiyuan that it will indirectly hold through the stock-holding platform Wensheng Hui, the Shanghai-based firm said yesterday.
Wensheng Hui was set up by bad loan manager Wensheng Asset Management which is participating in Huiyuan’s restructuring. Wensheng Asset will transfer 31.4 percent of the 60 percent equity that it holds in Wensheng Hui to Interchina Water, it added.
The move will help boost profitability and is in line with the firm’s strategic transition into modern agriculture and health foods, said Interchina Water, which started to lose money last year amid tighter environmental protection regulations. The company logged a loss of CNY137 million (USD19.6 million) in the first three quarters, while revenue plunged 15.3 percent year on year to CNY219 million.
Huiyuan, the largest fruit juice company in China with a 30-year history, used to be worth over HKD30 billion (USD3.8 billion) on the Hong Kong stock exchange. However, its share price began to slide after an unsuccessful takeover by US beverage giant Coca-Cola. In 2008, the Atlanta-based company offered USD2.4 billion to purchase a majority stake in the Asian rival but China’s commerce ministry scrapped the deal, citing monopoly concerns.
Huiyuan delisted from the Hong Kong stock exchange in January last year after almost three years of suspended trading as the Beijing-based firm had failed to disclose its earnings reports since 2018 due to liquidity woes.
In June this year, a Beijing court approved a creditors' application to restructure Huiyuan, which had accumulated debts of around CNY8 billion (USD1.1 billion), and Wensheng Asset was appointed bad loan manager.
Wensheng Asset, which has over CNY100 billion (USD14.3 billion) in assets under management, said it would invest CNY1.6 billion (USD229.8 million) to hold a 60 percent stake in Huiyuan through the stock-holding platform Wensheng Hui. It intends to help Huiyuan return to the capital markets in three to five years in order to repay creditors, the Shanghai-based firm said at the time.
Editor: Kim Taylor