China Resources Power fell the most in more than four years after Xinhua media said the power generator and the chairman of its state-owned parent intentionally overpaid for a 2010 acquisition

July 18, 2013 Leave a comment

China Resources Power Falls After Report of Deal Overpayment

China Resources Power Holdings Co. (836) fell the most in more than four years after the official Xinhua News Agency posted a letter on its website by one its reporters that said the power generator and the chairman of its state-owned parent intentionally overpaid for a 2010 acquisition.

The company’s shares fell as much as 11.8 percent, the biggest drop since Nov. 6, 2008, and were trading down 10.4 percent as of 2:20 p.m. in Hong Kong. The city’s benchmark Hang Seng Index was little changed.The letter written by Xinhua reporter Wang Wenzhi said Song Lin, chairman of parent China Resources (Holdings) Co., overpaid for the acquisition. China Resources Power paid 7.9 billion yuan ($1.3 billion) for an 80 percent stake in Shanxi province coal-mine assets that another party valued at half the price, according to the letter.

China Resources Power is unaware of the reason for the share price movement, it said in a statement to the Hong Kong stock exchange today. The company’s spokesman was in meetings and not available to comment, said a woman who answered the company’s main phone number in Hong Kong and refused to give her name. A media official at China Resources Co. who asked not to be identified said the company’s spokesman is traveling and can’t comment on the matter.

“It’s rare for a state-owned news agency or its reporter to take on another state-owned company in such a dramatic way,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Some investors could just be too scared to continue to hold the stock.”

Lower Offer

Xinhua reporter Wang’s letter was first posted at Xinhuanews.net and later picked up by Chinese news portals including Sina.com and Sohu.com. He wrote that another company had offered 5.2 billion yuan for the entire asset a few months before the China Resources bid.

“Chairman Song Lin and other senior management intentionally overpaid Shanxi Jinye Group’s assets in a 10 billion-yuan acquisition in 2010, causing billions of yuan of losses in state-owned assets,” Wang wrote in the letter. He didn’t respond to an e-mail seeking comment today.

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

Filed under Investing Process, Macro Trends

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