TCL will offer a total of 994 million shares (representing 38.45% of the company) at CNY 4.26 ($0.51) each on the Shenzhen Stock Exchange. Of those shares, 590 million will be issued to raise fresh funds, with the remaining 404 million shares being swapped for shares of TCL Communication Equipment, the company’s listed unit. TCL then intends to de-list TCL Communications in order to simplify its business structure.
This is an unusual move in the Chinese market, and could have some long-term implications there, as it paves the way for other state-owned companies to list as a complete entity. In China, many large state-owned firms have smaller units that are listed on the Shenzhen or Shanghai stock exchanges. The example set by TCL could see other Chinese companies following suit and de-listing their units and then re-listing the parent company.
This option presents the Chinese government with a new method of restructuring state-owned companies. However, the trade-off is that if companies list as a whole, rather than just listing a small unit, there is less room for manipulating the financial figures because the market will be able to scrutinize the books. At the moment, the Chinese stock market is vulnerable from the ease at which many listed Chinese companies can embellish their profits or siphon off funds.
TCL has said it intends to use the money raised from the IPO to help fund future acquisitions, both domestic and abroad. The funds will also be used for product and technology development.
In 2002, sales of color televisions accounted for 44.4% of TCL Corp’s revenues. Mobile phones made up 37.7%. In the first half of 2003, the company reported sales of CNY 12.7bn ($1.53bn) with a net profit of CNY 280m ($33.8m).
The share issue would be the first IPO on the Shenzhen stock exchange since October 2000. No listing date has been set yet.
This article is based on material originally produced by ComputerWire.
