Meishan Asset Management Co., Ltd. (MAM), the company's third-largest shareholder, has been getting antsy during the long-awaited approval process for its application to dispose of state-owned shares in the company.

Records show that 16.324 mln company shares, equal to a 5% stake, were transacted at RMB 4.77 per share, for a total of RMB 77.8655 mln, via the bulk trading system of the Shanghai Stock Exchange. The company has only three shareholders with more than 10,000 shares. Because the holdings of the top two shareholders are still within the mandatory lock-up period, it is assumed that the likely bulk seller was MAM, which coincidentally held 16.324 mln shares that were recently released from lock-up. Should this is the case, MAM's holdings in the company have decreased to 2.088 mln shares from 18.412 mln.

What is strange is that early in August 2008, MAM contracted to transfer all of its shares in the company to Sichuan Electric Power Company (SEP) at RMB 2.45 per share. The plan was undergoing relevant examination procedures, according to its latest public disclosure. Why has it resorted to a market transaction while awaiting the pending regulatory approval?

The answer may lie in the fact that the original transfer price was too low. Related rules dictate that such transfers should be priced according to the stock's price on the secondary market. As the current stock price is 90% higher than the agreed transfer price, the implementation of the contract would have been illogical.

Some analysts surmise that MAM was hoping to either bypass regulatory approval or to realize a significant gain.

Market watchers have underscored that MAM's 18.412 mln shares had been transferred without consideration in December 2003 from the State Owned Assets Supervision and Administration Commission (SASAC) of the State Council. Only one month later, MAM planned to sell the stake to Chengdu Yanyu Real Estate Development Co., Ltd. for RMB 40.74 mln. The plan was terminated on 18 Aug 2006 because the transaction did not get the nod from SASAC. It would appear that MAM has no interest in holding the company's stock.


Source: Shanghai Securities News

Date: 4 Nov 2008

CN01/VW/SW/MM