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China Shipbuilding's second privatization bid fails

State-run China Shipbuilding Corp's (中船) second attempt to privatize has failed, after the second round of bidding to sell a majority of its shares did not draw the required number of bidders.

The nation's largest shipbuilder received just two bids, while government regulations stipulate that there must be at least three. The bids came from Taiwan Maritime Transport Ltd (TMT, 台灣海陸) and a team led by China Steel Corp (中鋼), Fan Kuang-nan (范光男), president of China Shipbuilding, said in a telephone interview yesterday.

TMT also submitted a bid in the first tender round held last October. The team led by China Steel, Taiwan's largest steelmaker, was composed of Yang Ming Marine Corp (陽明海運), Cheng Lie Navigation Co (正利海運) and Yung Chi Paint and Varnish Mfg Co (永記造漆).

"I think the limited time for submission is the major reason for the share sale's failure," Fan said. "After all, this is a big investment."

The Kaohsiung-based company plans to sell about 66 percent of its shares worth NT$3.8 billion (US$115.48 million) to complete the privatization process.

Like the first tender, China Shipbuilding allowed only one month for investors to bid, which may not be enough for interested groups to get to know the company, Fan said. Its poor track record may also discourage some investors, he said.

It was losing money until 2001, when it carried out a restructuring plan, including laying off about half of its 5,200 workers and reducing salaries by 35 percent.

The company is currently in discussions with the Ministry of Economic Affairs' Enterprise Commission to push through a third share sale before the end of the year, Fan said.

The third tender would not need to have three bidders and whoever submitted the highest tender could win, Fan said.

For the first eight months of the year, China Shipbuilding posted pre-tax earnings of NT$64 million on sales of NT$13.65 billion, compared to pre-tax earnings of NT$41.59 million on sales of NT$10.29 billion a year ago.

The amount has exceeded the target of NT$33 million in earnings set by the government, Fan said. China Shipbuilding expects to earn over NT$95 million this year, Fan said.

China Shipbuilding's current orders will keep it busy until the second quarter of 2010, with the latest order of six 6,300 TEU container ships and six 4,200 TEU container ships from a German company in June, which is expected to bring in nearly NT$30 billion for the ship builder.

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