Shanghai Industrial, the city government's investment arm, will book an exceptional loss of $200 million this year due to the mainland's proposed share reform for its 56.63 per cent-held A-share biotechnology subsidiary, Shanghai Industrial United.
The ongoing reform to make non-tradable shares tradable is likely to have a big impact on Hong Kong-listed companies that hold such A-share vehicles, although the size of the deals does not come close to the trigger point for calling the consent of all shareholders.
'Although the company does not need shareholder approval for the payment, the loss is significant when compared to the net profit,' Macquarie Research conglomerate analyst Peter So said.
Shanghai Industrial reported a net profit of $1.38 billion in 2004, with an exceptional gain of $600 million from the listing of Shanghai SMIC, the integrated circuit foundry.
It is expected to post a profit of $1 billion for last year.
Under the reform, Shanghai Industrial will offer minority shareholders three non-tradable shares for every 10 A shares held, in exchange for their consent to convert all non-tradable shares into tradable A shares.
