Business Exchange Buzz up! Digg Print Email Dec. 21 (Bloomberg) -- China Shenhua Energy Co., the unit of the nation's biggest coal producer, rose in Shanghai and Hong Kong trading after it agreed to pay $1.3 billion for assets from its parent.
The shares gained as much as 7.7 percent in Shanghai, the most since Oct. 11, and were trading at 25.6 yuan at 10:05 a.m. local time. The benchmark Shanghai Composite index fell 0.07 percent. The stock gained 3 percent in Hong Kong.
China Shenhua will pay 8.7 billion yuan ($1.3 billion) for mining rights and companies controlled by its state-controlled parent Shenhua Group Corp., according to a statement released by the Hong Kong stock exchange yesterday. The purchases will increase the listed company's recoverable coal reserves by 24 percent to 9.15 billion metric tons, the statement said.
Investors were expecting the company to buy more from the parent, but this will be taken as the start of more acquisitions, said Helen Lau, an analyst at UOB-Kay Hian Ltd. in Hong Kong. The parent has more large mining assets that it will inject into the listed company at some point.
China Shenhua is also buying companies involved in power generation, coal wholesaling, oil product sales, financial services and information technology, according to yesterday's statement.
Reducing Competition
The acquisitions will be funded from the proceeds of China Shenhua's initial public offering of shares that trade in Shanghai, according to a statement to the city's exchange yesterday.
China Shenhua said in August it was planning to buy assets from its parent. The purchases will strengthen the energy producer's coal business and reduce competition between the listed company and parent, according to yesterday's statement to the Hong Kong exchange.
Twenty five analysts surveyed by Bloomberg have a Buy rating on China Shenhua. Six analysts rate the stock a Hold.
Third-quarter profit rose 11 percent to 9.7 billion yuan after the coal producer increased production to meet higher demand in the world's fastest-growing major economy.
Full-year net income may rise 20 percent to 38 billion yuan, according to a mean estimate of 16 analysts surveyed by Bloomberg.
