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Kaifeng Carbon is a CNY 7bn diamond in the rough
Posted on Tuesday, 06 November 2018 14:25
Shares in Henan Yicheng New Energy have been suspended from trading ahead of a proposed major asset restructuring for the acquisition of Kaifeng Carbon is about CNY 7.00 billion (USD 1.02 billion).
The listed silicon carbide manufacturer is buying all 100.0 per cent from 16 shareholders in an all-scrip deal equating to a price of CNY 3.79 apiece.
Controlling investor China Pingmei Shenma Energy & Chemical, which is ultimately owned by Henan State-owned Assets Supervision and Administration Commission, is handing over its own 51.3 per cent in Kaifeng Carbon.
On completion, this enterprise will remain as the largest shareholder, with a 44.6 per cent post-deal stake in Yicheng New Energy.
Kaifeng Construction Investment will be the second-largest backer with 17.0 per cent of the restructured entity, followed by Pingdingshan Jinding Coal Chemical Technology (7.5 per cent), and Henan Investment (6.7 per cent).
The asset injection comes as Yicheng New Energy incurred a net loss attributable to shareholders of CNY 1.02 billion in the financial year ended 31st December 2017.
Changes within the silicon carbide industry has negatively impacted the group’s balance and income sheets, which is putting increasing pressure on the manufacturer to delist.
The planned asset injection ought to rectify matters by boosting results at the top and bottom line and improving scale and overall value.
Established in 2002, Kaifeng Carbon is involved in research and development, production and sale of ultra-high-power (UHP) graphite electrodes that are widely used in electric arc furnaces for the production of steel by smelting scrap or raw material.
It has wide applications in ferroalloy production, silicon metal production, and yellow phosphorus, among others.
The mining and automobile industry, technological advancements in automobiles and increasing demand from developing nations are just some of the key factors driving growth for the graphite market.
However, as China’s use of this resource is still relatively low, it means Kaifeng Carbon is positioned to take advantage of future demand.
Kaifeng Carbon had total assets of CNY 4.52 billion, as of 30th September 2018, and posted net profit of CNY 1.60 billion on operating profit of CNY 3.13 billion in the first nine months of 2018.
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