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Zhihe sells entire Yulong stake
Posted on Wednesday, 12 June 2019 12:07
Lhasa Zhihe Technology Development is offloading its entire 50.0 per cent stake in Jiangsu Yulong Steel Pipe for CNY 2.75 billion (USD 397.62 million) in which appears to be a loss-making equity sale.

The controlling shareholder made its first investment in the listed welded tubular product manufacturer in 2016 when it bought a 16.9 per cent stake from four individuals for CNY 931.00 million.

It subsequently increased its position to 30.0 per cent for CNY 967.00 million in March 2017, and finally ended up with 50.0 per cent after acquiring an additional 20.0 per cent for CNY 1.63 billion.

Zhihe is now handing over 391.54 million stocks at an average CNY 7.02 apiece, representing a premium of more than 25.0 per cent to CNY 5.59, being the last unaffected closing price prior to the announcement.

Shanghai Houkai Technology will become the new controlling shareholder with a 26.0 per cent stake, while Ningbo Huanxi Industrial will own 10.9 per cent of the business, followed by Lin Mingqing (7.8 per cent) and Wang Xiangyu (5.2 per cent).

Yulong’s main business comprises the manufacture and sales of welded steel pipes but, under the guidance of the controlling shareholder, has recently added graphene and lithium battery materials operations to its portfolio.

The company acquired a third of Tianjin Yuhanyao Graphene Energy and has just transferred this equity to a subsidiary, though the deal has not yet had a chance to positively impact financials.

Annual operating profit in the 12 months of 2018 was up 10.0 per cent at CNY 1.52 billion against a 72.5 per cent decline in net profit to CNY 21.88 million.

In the first three months of 2019, the company booked CNY 79.13 million at its top line and incurred a net loss attributable to shareholders of CNY 7.87 million.

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