China Guangdong Nuclear Power Group, which operates atomic plants 50 kilometers (31 miles) from Hong Kong's financial center, will buy pharmaceutical supplier Vital Group Holdings Ltd. (1164), giving its uranium unit a listing in the city.
China Uranium Development Co., a wholly-owned subsidiary of Guangdong Nuclear, agreed to pay more than HK$984 million ($126 million) for Vital shares and convertible bonds, according to a Hong Kong stock exchange filing yesterday.
The deal gives Guangdong Nuclear access to funds in Hong Kong, one of its biggest electricity customers. It may also test investor appetite less than a month after Japan's worst nuclear disaster prompted countries from Germany to China to review or halt atomic plants.
"Buying a company like this gives them a quick way to get a backdoor listing and access to funds to buy uranium resources," said Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong. "Despite the Japan crisis, China will expand its nuclear power program after initial safety checks and this is a good time to get bargains securing uranium resources."
The stock exchange statement didn't detail China Uranium's plans for Vital. Guangdong Nuclear spokesman Liu Kaixin didn't answer three calls during office hours. Three calls to Vital executive director James Liu during office hours weren't answered.
CNNC Nuclear International
Three years ago, CNNC Nuclear International Uranium Corp., a unit of the nation's biggest atomic power plant operator, China National Nuclear Corp., purchased a stake in Hong Kong- listed aluminum and zinc die-casting company United Metals Holdings Ltd. and changed its name.
The renamed CNNC International Ltd. in 2009 bought Canada- listed Western Prospector Group, which explores for uranium in Mongolia. It acquired uranium assets in Niger from its parent last year, the China Daily reported.
China has the world's biggest nuclear program, with 26 reactors under construction and 28 planned, according to the World Nuclear Association. The government suspended approval of new projects on March 16 pending safety checks of existing plants as Japan tried to prevent a meltdown at its Fukushima Dai-Ichi plant, the worst nuclear disaster since Chernobyl. Shares in uranium companies and prices for the nuclear fuel plunged.
Germany said on March 15 it will close seven nuclear reactors for safety review. India said on March 14 it will examine its 20 atomic plants.
Daya Bay Leak
Guangdong Nuclear owns the Daya Bay and Ling Ao nuclear power stations in southern China, according to its website. Daya Bay, which supplies about a quarter of Hong Kong's electricity, discovered a radiation leak in October which it said was in a contained area.
China Uranium will buy 1.67 billion Vital shares for 23 cents each, a 36 percent discount to the last traded price. It will pay HK$600 million for the bonds, which are convertible at the same price per share. Vital shares surged 33 percent in two days before they were suspended on March 4.
Initial details of the transaction were published on the Hong Kong Stock Exchange website on March 22. Vital suspended trading on March 4 pending a possible restructuring. It said on Jan. 25 that a supplier had lost the Chinese import license for one of its main drug products.
Vital has 779 employees in mainland China, Hong Kong and Macau, according to its 2010 earnings statement released yesterday. Its shares traded at 36 Hong Kong cents on March 3.
To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at email@example.com