December 6, 2004

 

 

Beijing Enterprises to Sell Dairy Unit

 

Beijing Enterprises Holdings Ltd., the investment arm controlled by Beijing's municipal government, will sell its entire interest in its dairy unit for RMB 561 million ($1= RMB 8.2766).

 

The retail-to-infrastructure conglomerate will sell 65.46% of Beijing Enterprises (Dairy) Ltd., which holds 55% in Shanghai-listed Beijing Sanyuan Foods Co., to Beijing San Yuan Group Co. for RMB323.6 million.

 

Beijing San Yuan already holds 15% of the Shanghai-listed company, which makes and sells dairy product as well as operates fast-food McDonald's franchise stores in Beijing and Guangdong.

 

Beijing Holdings Ltd., Beijing Enterprises' ultimate parent and effectively owned by the Beijing municipal government, will buy the remaining 34.54% in Beijing Enterprises (Dairy) for RMB 237.4 million.

 

The buyers will pay in cash installments, which will be completed over three years.

 

Beijing Enterprises said proceeds from the sale will become general working capital, adding that it hasn't identified any specific investment where it can spend the proceeds on.

 

The company said the transaction gives it an opportunity to restructure its business, given Beijing Sanyuan's business has been affected by keen market competition.

 

Under Chinese accounting standards, Beijing Sanyuan had a net loss of RMB 52.69 million in the nine months ended Sept. 30.

 

It contributed a net loss of HK$24.3 million of losses to Beijing Enterprises in the first half of this year, under Hong Kong accounting standards.

 

An independent board committee will be formed and an independent financial adviser will be appointed to advise independent shareholders on the transaction, which needs to be approved by shareholders in an extraordinary general meeting.